Loan Types

HomeLoan TypesInterest Only Loans

Interest Only Loans

With this type of loan you will only repay the interest portion of the loan NOT the principal. The full term of the loan could be up to 30 years but the interest only term can only be for 1-10 years of this term. During the interest only period the original loan amount will not reduce. Once the interest only period has finished the loan with revert to a Principal and interest loan until the end of the full term.

 

Benefits

  • Lower repayments at the start of the loan term
  • Used by investor to maintain the higher debt level for tax purposes
  • Allows you to purchase an investment property on Interest only (lower repayments) and direct the majority of your income to reduce the loan on your principal place of residence

Pitfalls

  • Repayments will increase at the end of the interest only period

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