Interest Only Home Loans

Interest only home loans

Investors and accountants love interest only loans. Most investors can request an interest only home loan to 5 years; Sophisticated investors can request a 10 year interest only loan.

About interest only home loans

Take advantage of the hot property market and buying opportunities! Our interest only home loan can help you get into the market with minimal monthly repayments, protecting your cash flow. Interest only home loans are easier to manage and easier to calculate. Interest only loans also improve your return on capital ratios. The interest only period of the home loan is available for up to 10 years. Interest only loans are also available on owner occupied mortgage loans where the property is your principal place of residence. You will need an experienced mortgage broker to guide you in the right direction. Conserve cash flow as you continue to grow your investment property portfolio & maximise tax deductions. Chanel surplus cash into paying down a non tax deductible home loan helping in faster home ownership. Owner occupied home loans also known as principal place of residence home loans. Interest only home loans come in handy for parents that have substantial private schools fees, conserving cash with the intention to increase repayments later. Your mortgage broker may decide that it is better for you to pay the maximum amount towards your everyday variable rate home loan & pay the minimum interest only repayment for as long as possible against your tax deductible investment loan to fastrack your asset accumulation path at your peak career income stages. Homeowners that are approaching retirement and wishing to sell assets or cash in Super to own their home may switch to interest only home loans to enjoy life earlier. Investors and homeowners alike that have medium to long term plans may enjoy the benefits of a longer (double) interest only period. Hint: Always consult your professional mortgage broker & tax agent too.

Advantages

You may need to temporarily free up cash flow for, say, setting up your home, renovations or to pay for relocation & minor renovation costs

If you’re looking to get into real estate investment then an interest only loan can help you do so on a low impact & modest budget.

Disadvantages

Once the interest only period of your home loan expires, there can be a substantial increase in the repayment amounts.

None of your repayments are being applied to the home loan principal, which means that your outstanding home loan balance remains unchanged.

Interest only mortgages are exactly what they sound like they should be. Your mortgage broker will explain that instead of paying back the interest and the principal amount, the aim is to only pay the interest of a loan. These loans are a great way to get into the property market, especially as an investor. They can also be beneficial if you need cash flow for your investment, or are interested in buying shares. The theory is the increase in the value of your property or your share portfolio, over time, will cover the principal part of your loan. These kinds of mortgages can be attractive but come with an element of risk, especially if property prices, or the share market, drops. Interest only mortgages usually have lower payments, and if you already have a sum of money, then this can help free it up for other things. And these kinds of mortgages are usually only available for up to a maximum of 10 years, after which they will revert to principal and interest.

If successful, armed with advice from professional mortgage broker, an interest only loan will allow you to invest in a property, only pay the interest on the loan, and then sell the property to cover the principal, and make a profit. However, if you hang on to your interest only loan for a while longer, there are a few things to remember when it comes to repayments. Once the payments hit the end of their interest only period, there can be a substantial increase in the amount. This is because the principal part of the loan will cut in. It is important to make sure you have budgeted for this increase. It’s also important when talking about interest payments to be abundantly aware that as none of the initial payments are applied to the loan principal amount, you will not be increasing your equity in your property other than capital gain.

Your mortgage broker may recommend either variable or fixed interest only mortgages, and even split your loan between the two, based on your own financial situation. However, it is important to be careful when you are considering these mortgages. While the repayments can be tax deductible if you are using the loan for an investment property, interest only mortgages are mostly a short-term benefit. And they can require a lot of discipline because it is important to realise that in the medium term the repayments are going to increase substantially. Best to be guided by your mortgage broker in relation to the required discipline in ensuring you have the money available when it is needed, or being prepared to sell the property before any principal payments become due, no matter the state of the property market.

Like everyone who has a variable interest rate loan, having an interest only loan means your repayments can be influenced by any interest rate changes. Variable rates are influenced by the official interest rate is set by the Reserve Bank. This rate is the overnight rate the Reserve charges lenders to borrow. Banks and lenders usually respond if this interest rate changes, which means a change in the variable home loan rate. This is one way the Reserve Bank can slow down or speed up the Australian economy. The theory is if people spend more on their mortgages, they are spending less in other areas of the economy, and vice versa. The variable rate can also influence fixed rate offerings, and if your payments are based around interest rates, then clearly that can influence the size of your payments. If you are not an investor, but an owner-occupier, then interest only mortgages can be problematic in a volatile interest rate environment. Theoretically, if you have an interest only loan, you have concerns about whether or not you can pay back a loan that is both principal and interest. Turn to a professional mortgage broker for the best advice.

Mortgage brokers offer a range of interest only loans, with interest rates varying depending on the type of loan. Their latest & best mortgage calculator can help you compare the different kinds, and give you an overall picture of what might be best for you. Experienced & specialists mortgage brokers can be on hand to answer any questions you have, and give you all the extra information you need. They want to find the best interest only loan to help you achieve your property dreams, and they will take you through everything you need to know. They will walk you through the different types of fees, and what they all mean. There may be either upfront or ongoing fees with certain loans, and we can help you reveal any hidden traps. They will also take you through the different interest rate options, and the features are of the loans you are comparing. There can be a few little tricks to interest only mortgages, such as offset accounts and making extra payments, all of which can make a big difference.