The name says it all. Repayment of the principal is deferred for an agreed period (usually 1-5 years) and during this time you only pay the interest charges which results in a lower minimum payment as there is no allocation for principal. At the end of the interest only period – usually one to five years – you must start making Principal and Interest Repayments over the remaining term of the loan, although some lenders will also allow you to extend the interest only period.
- Payments are lower during the interest only period offering you time to adjust or freeing up money to renovate or improve the property.
- For investment properties, it lowers payment commitments enabling you to maximise payments any non-deductible debt
- Maximises mortgage rebates
- Payments increase at the end of the Interest Only period
- Overall interest costs wind up more expensive than paying Principal and Interest
- Many lenders assess your ability to repay the loan only on the principal and interest repayments over a shorter repayment term which can reduce your borrowing power
Arrange a free, no obligation appointment to learn how Mates Rates can help you by by making an online enquiry or call us now on 1300 55 81 61.