Should I apply for an interest only loan?
Interest only loans may be ideal for covering a short term situation or for an investment property. For example, you may be buying a new home before selling your existing property or need to do some renovations.
Interest only loans keep your repayments as low as possible. But, because you aren’t paying any of the principal (the money you borrowed) the total interest you end up paying will be higher than if you were paying off the principal as well.
Bear in mind too, because each of your regular payments only covers the interest owing on the principal, you will pay the full amount owing in one final payment at the end of the term.
There may be tax implications with an investment property and the best outcome for you will depend on your individual circumstances. So it’s best you seek advice from your accountant or tax advisor to decide if an interest only loan works in your favour.
See our home loan options for this and other types of home loans.
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