Interest Only Home Loans
How to find the Best Interest Only Home Loans
Most home loans will require you to pay off the equity and the principal in the repayments. This will mean that while you are paying the interest the value of the loan will decrease over time and you will eventually pay off the loan. There are other loans that are available and are suited to investors that allow you to only pay the interest portion of the repayments. These are called interest only loans. This article will explain what interest only loans are, what are the features and what the risks are.
What are Interest Only Home Loans
Interest only loans are a specific type of loan that is suited to a specific niche of people. This section will explain what interest only home loans are and who they are suited to:
- Interest only home loans. The interest only home loans are loans that only require you to pay the interest portion of the repayments. While you only pay the interest part of the repayments you will be saving money compared to those who are paying the interest and principal.
- Who are interest only home loans suited to. The interest only loans are suited mainly to investors. Investors will usually use interest only loans to purchase a property and make minimal repayments. During this time they will hope that the property values will go up (or they will make renovations) so that when they resell the property they will make money.
Featured Interest Only Home Loan
The Loans.com.au – Dream Catcher home loan offers you a low interest rate, Plus no application fee,no legal fee.
- Interest Rate of 6.13%
- Comparison Rate of 6.47%
- Application Fee of $0
- Maximum LVR With LMI: 80%
- Minimum Borrowing: $50,000
- Maximum Borrowing: $750,000
Featured Interest Only Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Loans.com.au – Dream Catcher |
A home loan offer with a $0 application fee and one of the lowest available home loan interest rates in the market. | 6.13% | 6.47% | $0 / $375 | 80% | $50,000 / $750,000 |
 
|
 Illawarra Home Loans Bank Beater Home Loan |
A low variable rate, beaten down even further by 0.05% p.a. after 5 years. | 6.28% | 6.56% | $0 / $345 | 90% | $250,000 / $1,000,000 |
|
Loans.com.au – Dream Loan Express Home Loan |
A flexible home loan offer with one of the lowest available home loan interest rates in the market. | 6.29% | 6.30% | $0 / $0 | 80% | $50,000 / $750,000 |
|
 UBank UHomeLoan (Variable Rate) |
A home loan offer with a $0 application fee and one of the lowest available home loan interest rates in the market. | 6.14% | 6.14% | $0 / $0 | 80% | $100,000 / $1,000,000 |
|
 State Custodians Mortgage Company Standard Variable Offset Loan |
Voted the best loan for first home buyers, this loan offers no application or ongoing fees and a stack of great features including unlimited redraw and 100% interest offsetting. | 6.37% | 6.57% | $0 / $345 | 95% | $150,000 / $1,000,000 |
|
 HomeStar No Fee 100% Offset |
Enjoy no fees and zero mortgage insurance to pay. HomeStars offset loan allow flexible repayment frequency, intrerest only repayments and visa debit card and full banking functionality. | 6.46% | 6.46% | $0 / $0 | 90% | $250,000 / $750,000 |
|
State Custodians Mortgage Company Breathe Easy Offset Loan |
Awarded Best Non Bank Basic Variable Loan of 2011 this fantastic product comes with no fees and a stack of features including unlimited redraw and free 100% interest offsetting. | 6.62% | 6.48% | $0 / $0 | 95% | $150,000 / $1,000,000 |
|
 Community First True Basic Home Loan |
An easy to manage loan with all the standard features available as an option. Enjoy no annual or monthly account keeping fees. | 6.84% | 6.92% | $500 / $0 | 95% | $100,000 / $1,000,000 |
|
 MyRate Advantage Rate Loan |
Zero fees, unlimited redraws and interest only repayments. One of the best all-round loans on the market, perfect for first home buyers or those looking to refinance. | 6.35% | 6.35% | $0 / $0 | 95% | $100,000 / $2,000,000 |
|
HomeStar Advantage Loan |
No upfront or annual fees offering unlimited free redraw and full banking functionality. | 6.53% | 6.53% | $0 / $0 | 95% | $150,000 / $2,000,000 |
|
What are the Features of Interest Only Home Loans
The interest only loans are not full of features because they only require you to pay the interest. This section will explain the few features that are offered with the interest only home loans. These are:
- Pay only the interest. Obviously, the main feature of the interest only home loans is the ability to make only the interest portion of the repayments.
- What happens at the end of the loan. When the interest only period expires you will then have to decide what you would like to do with the loan. Most investors will sell the property and hopefully make a profit while paying off the loan. Another option would be to refinance the loan and use it as a rental property and a long term investment.
What are the risks.
While the interest only loans seem like a great idea they can be risky. This section will explain what the risks associated with interest only loans are:
- Negative Equity. As mentioned before most people will use interest only loans to make money off a property. However, if property value decreases while you have the loan you will run the risk of developing negative equity. This is when the value that you owe is higher than what the property is worth. If this occurs you may sell the property and still have to pay off some of the loan with your own money.
- You pay too much. When you are paying off an interest only loan you are only paying a small amount. However, if you don’t sell the property for as much as you expect then the costs of buying the house and paying off the loan may have been more than you will receive in the end.
Interest only loans are loans that are particularly suited to investors. The interest only home loans will allow people to buy a home, pay as little as possible in repayments and hopefully sell it at an inflated price in the future. However, there are some risks associated with this type of loan.
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