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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.
Our owner occupied interest-only rates
Our investor interest-only rates
Product name
Interest only rate p.a.
2.24%
2.96% comp rate*
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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.
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
SClaim 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.
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Extremely happy with these guys. I checked them out initially for their low rates but was most pleased with the various team members who helped arrange my loans, especially Ray the lending manager - absolute legend and he deserves a raise - such a great guy who sorted us out all along the way and explained everything very clearly. The entire team were all very patient as it took a long time for us to find a property, including a few false starts at auction. No wait times on the phone with them either. 100% recommended, especially after my experience of being with a major lender for a long time and paying above market interest rates for my loyalty.„
Lawrence I.
April 28, 2022
“ Friendly and efficient service
Seamless experience. Friendly and efficient service.„
Garth W.
April 25, 2022
Frequently Asked Questions
A loan can be on interest only repayments for a period of 1-5 years.
Yes, you can make additional payments on an interest-only loan. If the interest-only loan is on a variable interest rate, you can make unlimited additional repayments. If the interest-only loan is on a fixed rate, you can make additional repayments of up to $10,000 per fixed year without penalty.
The main thing to consider with an interest-only home loan is if it is really best for your financial situation. While interest-only home loans are a great option for investors and home-owners alike, they are typically better suited for investors for tax purposes. At the end of your interest only period, you will need to start paying back the principal as well as the interest on your loan, and you can expect your principal and interest repayments to be higher as you are paying back the principal over a shorter amount of time (ie. 25 years vs 30 years)
You can compare our interest only home loan options here.
How to apply for an interest-only home loan
At loans.com.au, we make applying for an interest only home loan simple so you can purchase your new property sooner. Here’s how.
Apply online
Apply online
Fill out our application online for one of our interest-only loans, or talk to one of our Australian-based lending specialists to do the hard work for you.
Goodbye paperwork
Goodbye paperwork
Login to onTrack and upload documents at ease. Receive your documents from us and track your application to approval.
Settle and save
Settle and save
We do everything required for the loan settlement, so you can start saving money.
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