Interest only home loan repayments are where you pay only the interest charge every month. For example, if you have a mortgage of $100,000 over a 30 year term, and went for interest only repayments for the first 3 years, you would pay just the interest charges for the first 3 years, and you would still owe $100,000 after those 3 years (assuming you didn’t make any extra repayments to your home loan). Then for the remainder on the home loan term, 27 years, the home loan would revert to principle and interest repayments, and your repayments would increase to pay the home loan down over that period. You may be able to re switch your home loan to interest only if it suits your needs.
You may be able to choose an interest only term, depending on your bank or lenders credit policy, from 1 to 15 years. Interest only repayments are available on both variable rate and fixed rate home loans. A line of credit generally requires just the interest payment every month.
There are many reasons why you may choose interest only repayments on your home loans. Some may include –
The home loan is for investment, and the interest charges are tax deductible.
You may, in the short-term want to decrease your repayments, so interest only repayments may help you monthly budget.
The home you are purchasing to live in, may become an investment property in the future, so you want to keep the debt as high as possible, to maximize your tax benefits when the property use does become investment.
There are many reasons why you may choose interest only repayments. You should speak to your accountant or financial advisor, to see if this option may suit your financial needs.
With some banks or lenders, you can still have an offset account with an interest only variable home loan. This will save you some interest charges, if it suits your needs.
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