With an Interest Only loan, during the initial term of the loan (typically 2-5 years) you only repay the interest on the loan principal.
After this, the loan is either repaid in full or reverts to "principal plus interest" with repayments established to clear the loan within an agreed term.
Interest only loans are popular among investors who plan to sell a property in the short-medium term.
- Repayments are lower so investors have more money to renovate the property.
- The cost of buying is lower in the short-term.
- The risk of volatility in the property market may be less in the short term so investors may have greater confidence about a potential resale price.
Interest only loans are generally not recommended for ordinary home-buyers or investors who plan to own the property for long-term income and growth.
Questions about which loan is right for you?
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Geelong: 03 5245 1739 | Portland: 03 5521 5333 | WA: 08 9531 6161 | Yennora: 02 9681 9642
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