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

Home loans in Hobart

While Hobart's housing market is strong, housing affordability has actually improved throughout 2006. Therefore, this improved housing affordability provides the perfect opportunity for new home buyers in Hobart to get into the property market before house prices rise further. Here are some tips for first home buyers in Hobart on home loans and the First home Owners Grant.

Online mortgage calculators help you find the right loan

For borrowers looking for a competitive mortgage in Australia, there are many different home loan options available. So how do you find the best mortgage for your individual needs? Well, you can start by comparing how much your mortgage repayments will be by using our mortgage repayment calculators.

Negative Gearing Property - How negative gearing works who is it suited too

Over the past decade or so, investing in property has become all the rage in Australia, especially in the larger property markets of Sydney, Melbourne, Brisbane and the Gold Coast. Many budding investors have been attracted by the huge gains that have been achieved thanks to the Australia-wide property boom. Another attractive reason is that of the tax benefits of negative gearing. But is negative gearing into property really a good investment strategy?

How interest rates are determined in Australia

In Australia, the interest rates used to calculate mortgage repayments are guided by the official interest rates set by the Reserve Bank of Australia (RBA). The RBA will change interest rates from time to time in order to control inflation. Here we look at interest rates including why they might rise or fall and the different interest rates that apply to home loan mortgages.

Stamp duty calculator online

Most states in Australia charge some form of stamp duty on real estate. And to make matters even more complicated for the property buyer, this differs in each state. Find out how much stamp duty you will need to pay in different states using our stamp duty calculators.