An interest only home loan means you only repay the interest on the principal (amount borrowed) for a fixed period of time. While not recommended for first home buyers, it’s a convenient and attractive option for property investors, as you will have lower costs for the first few years of your loan.
The length of the interest only term is usually one to five years.
An interest only home loan can be a good technique for property investors to a get a strong return from an initial smaller investment. In the short term, the lower repayments can free up money for renovations or property improvements – yielding a better return when you rent the house out or sell.
Interest only mortgages also can also help first time investors get a foot on the investment property ladder. The lower costs for the first five years will make it easier to balance this mortgage with the loan on the property you live in.
It’s important to remember that once the interest only period ends, you will be responsible for full principal repayments and interest. This can feel like a sudden increase, so you will need to plan ahead to accommodate these larger payments down the track.
We’ll help you decide whether an interest only loan is right for you.
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