Why interest only loans can benefit a customer

Posted by Paul Ryan • 2 July 2014 • Tags:

Over the past couple of weeks a number of customers have made enquiries in regards to transferring their loan from principal and interest to interest only.

Interest only means you are only paying the interest on the outstanding balance of your loan. That is, if you just make the interest payment your balance will not reduce.

There are a variety of reasons why a customer would just want to pay interest only.

  • They may be looking to sell a property and want the extra funds to spend on improving the property.
  • They may be experience some pressure within their budget and by transferring their loan to interest only they may relieve some of the pressure
  • It may be better option for tax purposes.

steadying the home loan.pngWhatever the reason it shouldn’t be frowned upon.

What is important to note is that most of the loans available today will still allow you to make principal reductions at any time even if your loan is set up as interest only.

If and when you do make a principal reduction, your balance with then reduce which means you will end up paying less interest.

To help you understand your options in regards to making repayments the intouch Finance calculators are a great tool to play around with - http://www.intouchfinance.com.au/our-services/home-loans/home-loan-calculators/