When you take out an interest only home loan, you are taking out finance that allows your repayments to be based only on interest that is being accrued on the total borrowed amount. Other loans require you to pay the interest and principal.
An interest only loan can be taken out for a period of up to five years, and you can also choose between a variable or a fixed rate; a great part about these loans is that most lenders will let you switch over from a variable rate to a fixed rate without being charged at any time.
What Are The Benefits Of Interest Only Home Loans?
One of the reasons as to why people choose interest only home loans over other mortgages is due to the great cash flow benefits. After your interest only period is up, you can then move onto the principal and interest term of your loan. You will often have the option of borrowing up to 95 per cent of the property's value.
It is undoubtedly true that interest only home loans are very beneficial for certain people, especially those buying property for investment purposes. The question is, does it suit your circumstances? If you cannot confidently say "yes", then it is important to speak to your financial advisor, mortgage broker, property lawyer or accountant to dispel any confusion.
It is often also a good idea to get a second opinion to confirm that the advice is indeed accurate. Then all that's left to do is choose the right mortgage product, take out the loan and become the owner of a new home.