Interest only home loans lower repayments to suit investors

Interest only home loans are popular among property investors because they allow the investor to make lower monthly repayments on the home loan. This is because unlike other home loans, repayments are made on the interest portion of the loan only. Here we take a look at interest only home loans.

DOMDocument::loadXML(): Start tag expected, '<' not found in Entity, line: 2

Looking for a great value home loan with super fast approval?

Get Pre-Approval online & get a response in minutes with MyRate.

What is an interest only home loan?

With a normal interest and principal home mortgage, your monthly repayments are used to reduce both the total interest you owe on your home loan as well as the principal amount (the actual amount you borrow). With an interest only home loan mortgage however, the monthly repayments reduce the interest payable on the loan only. The principal amount of an interest only home loan remains the same as when the loan was originally taken out. So, if you borrow $300,000, you will still owe this amount at the end of the loan term.

The advantage of an interest only home loan over a principal and interest home loan is that the monthly repayments are much lower. This lower monthly repayment makes the interest only home loan particularly popular among property investors in Australia.

See just how much lower the repayments are on an interest only home loan by trying the interest only home loan calculator on our home loan resources page.

The term of an interest only home loan

Interest only home loans are usually taken over a much shorter term than a principal and interest home loan. For the borrower, this shorter term reduces the total amount of interest payable on the home loan. Typically, the term of an interest only home loan will be between two and five years. At the end of this term, the full principal amount will be due to be repaid. For property investors, interest only home loans offer the opportunity to make a short term investment in a property for a relatively low monthly repayment.

Are interest only loans suitable for owner occupiers?

Because you are only repaying the interest, interest only home loans are generally more suitable for a business or for property investors than they are for owner occupiers. While this may usually be the case however, owner occupiers may benefit in some circumstances. Interest only home loans are most beneficial where the property will be sold within a shorter period, usually within five years, for a profit. One of the risks of interest only home loans is where the value of the property falls or does not rise sufficiently in value due to a downturn or drop in the property market. This is because the full principal amount of the interest only home loan must be repaid.

DOMDocument::loadXML(): Start tag expected, '<' not found in Entity, line: 2

Digg this Post page to del.icio.us Post page to Furl

Home Loan Info.com.au

Home Loans Australia

Refinancing Information

Home Loan Information

Mortgage Broker Information

Featured Home Loan Information

Adelaide Home Loans and Mortgage Options Reviewed

Looking for a home in Adelaide? Thinking about home loans and finance, but wondering where to start. Our website is hear to assist you in your search for the perfect Adelaide home loan. Our partners are experienced in helping home buyers, just like yourself in finding the best solution available.

Negative Gearing Calculator Online

Canberra Home Loans Mortgage Information

If you are looking for information about a Canberra home loan, you have many options available to you when it comes to choosing your home loan. Here are just three home loan options you will have when seeking finance for your new home in Canberra.

Online home loan calculators help you find the right mortgage

In Australia, there are many different home loan options available thanks to the cut throat competition in the home lending market. For consumers seeking a home loan, this competition means that there are a wide range of innovative home loans available at very competitive interest rates. So how do you find the best deal for your individual needs? Well, you can start by comparing how much your repayments will be by using our home loan repayment calculators.

Unlock the value of your home with a reverse mortgage

Over the past few years, the market in reverse mortgages has been steadily increasing in Australia. However, while reverse mortgages have become increasingly popular, few really understand what they are. Here we take a look at reverse mortgages, including their benefits and potential risks.