Useful Tips

Interest Only repayments

Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic. Contact us to discuss your individual circumstances.

Definition
It is possible to arrange with your lender to only pay the calculated interest on your loan each month, without any requirement to pay down the principle amount owing on your loan.
Unless you have a Line of Credit, Interest only periods are limited to a set time frame of the total loan term.

Benefits
The main benefit is that it reduces your monthly Cashflow requirements.

It is a particularly useful tool if you have both an owner occupied debt and one or more tax deductible debts. You can funnel all of your spare Cashflow into paying off your non tax-deductible loan, while maximising the interest that is tax deductible.

It could be useful too, if you have a period of time where your personal Cashflow is reduced e.g. maternity leave etc.

Disadvantages
You are not paying off any principle from the home loan.

At the end of the Interest Only period, your repayments will be calculated so that you pay off the principle of the loan over the balance of the loan term e.g. if you have a 30 year loan and have only paid interest for the first 5 years, then you will be required to repay the principle over the remaining 25 years.

Things to consider
Not regularly reducing outstanding debt is not something that all people are comfortable with, but Interest only repayments can be a useful financial tool in many situations.

We are always available to discuss and explore the full implications and how they might apply to you and your financial situation.