What is an interest-only loan?
An interest-only home loan allows you to only pay the interest on the amount borrowed (known as the principal) for an agreed interest-only period of 1-5 years. At the end of the interest-only period, loan repayments will increase to pay off the interest and principal of the loan.
How does an interest-only loan work?
Interest-only loans are only applied during the first period of your home loan, which can be up to five years. During this period, the loan repayments only consist of the interest on the loan balance (the principal). Therefore, repayments will be lower because you will not be paying off the principal.
After the interest-only period, the loan will revert to a principal and interest (P&I) loan. The loan repayments will include paying the interest and principal, rather than just the interest, resulting in higher repayments.
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Apply for an interest-only home loan online today. Or, one of our friendly lending specialist can do the hard work for you and manage your paperwork over the phone.
Either way, we can settle your loan quickly so you can start saving thousands sooner.
Who is best suited to an interest-only loan?
Interest-only loans can be a great option for for investors, or for home buyers who’d prefer to spend money on making improvements to the property rather than paying off the principal at the beginning of the loan. There may also be tax benefits for investors who choose an interest only loan.
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Benefits of interest-only loans
Keep your repayments low during the start of your mortgage
Save some extra cash or renovate your property with lower repayments during the interest-only period of your home loan.
Choose the interest-only period
Choose a 1-5 year duration of the interest-only period to best suit you.
Investor perks
Claim higher tax deductions with an interest-only loan as an investor, and use the extra cashflow to renovate your property.
Easily switch from an interest-only to principal and interest loan with loans.com.au
As a loans.com.au customer, you won’t need to do anything to switch from an interest-only to principal and interest loan. We will notify you of the change and the new repayment amount and automatically transfer your loan to principal and interest.
Save some extra cash or renovate your property with lower repayments during the interest-only period of your home loan.
Choose a 1-5 year duration of the interest-only period to best suit you.
SClaim higher tax deductions with an interest-only loan as an investor, and use the extra cashflow to renovate your property.
As a loans.com.au customer, you won’t need to do anything to switch from an interest-only to principal and interest loan. We will notify you of the change and the new repayment amount and automatically transfer your loan to principal and interest.
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Frequently Asked Questions
In this article, we provide important tips to help you make smart property investment decisions.
Breaking into the property market is easier said than done. With continuously soaring real estate prices, it’s getting more and more difficult to invest in properties. The good news is there are plenty of affordable suburbs in Australia that offer great investment opportunities.
Interest-only home loans allow you to only pay the interest on the balance you have borrowed for a specific period. Find out more on how do interest-only loans work.
Thinking of refinancing your interest-only loan? Learn more about it here.
There are a number of strategies you can choose from to repay your home loan debt. The key components of loan repayments are the principal and the interest. Find out more about what is principal & interest home loan?
How is the interest rate on your home loan determined and how is it calculated? In this article, we explain the basics of mortgage interest rates and how they affect your repayments.
As interest rate has a big impact on your mortgage repayments, it’s crucial to understand the different types of interest rates & how they work.
If you are looking to invest in property, you may need to consider a different type of loan than an owner occupier loan. Here’s a helpful guide to the different options you have as a property investor.
For most people, their home loan is their biggest debt and for that reason, there is a strong urge to pay it off faster.
What's the difference between an owner-occupied home loan vs investment loan? If you're considering taking out an investment loan for a second property, start here.