Interest only home loans

• Your balance (the principal amount) will not reduce during the interest only period.
• Interest rates for interest only home loans may be higher than if you were paying principal and interest (P&I).
• As you’re only paying the interest amount on your home loan during your interest only period, you won’t be reducing the balance (the principal component), which means you’ll pay more interest over the life of your loan.
• There are limits to how long you can have interest only periods – the maximum interest only period at any one time is five years for owner occupiers and 10 years for investors (credit criteria applies).
• Interest only is not available in the last five years of your loan.
• When your interest only period ends, your home loan repayments will automatically change to principal and interest (P&I). This means your repayments will increase as you start paying off your loan balance.
• It’s important to know what the expiry date of your interest only home loan is and make plans to allow for the expected  increase in repayments. 

With an interest only home loan you only pay the interest amount. This is for a set interest only period before your home loan automatically reverts to principal and interest repayments. Interest only payments are lower than if you were paying both the principal and interest components, however your loan balance won’t be reducing. 

At the end of your interest only period, the balance of the loan must be paid back to the bank over the period remaining before the end of the loan term. This means that the principal and interest repayments will be higher than they would have been before the interest only period.