Principal is the actual money you have borrowed and interest is the fee lenders charge you whilst you owe this money. A Principal and Interest home loan is simply one which includes an allocation for repayment of the principal together with the interest charge in your regular minimum repayment.
- Your loan is repaid with each installment with reduces interest costs and increases the equity in your property.
- Minimum repayments are higher as they include the interest charge together with an allocation for principal.
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