![]() Tax incentives for investors: If you’re a property investor you may also be able to benefit from tax deductions associated with the interest-only repayments made on an investment loan. This could make it easier for borrowers to purchase a property sooner, or they could redirect the savings made towards paying off other types of debt with higher interest rates e.g. Lower initial repayments: The major attraction of opting to make interest-only repayments is that the amount you’ll need to pay back over the interest-only period will be lower than it would be if you opted to make principal and interest repayments. What are the advantages of interest-only home loans? The crux of it? While the couple’s repayments for the first five years would initially be lower if they opted to make interest-only repayments, they would end up paying $24,462 more over the life of the loan. Once that interest-free period ends, their monthly repayments would increase to $2,259 for the remaining 20 years of the loan.Ĭomparatively, if they chose to opt for principal and interest repayments, James and Elle would need to make monthly repayments $1,939 for the 25-year loan period. ![]() They find that over the first five years of the loan (the interest-only period) they would need to make interest-only repayments of $1,067/month. ![]() The couple also plan to make their repayments on a monthly basis. To do this, James and Elle used ASIC Moneysmart’s interest-only mortgage calculator to work out the costs involved on a $400,000 home loan with an interest rate of 3.20% being paid off over 25 years. But before they take the plunge, the couple want to consider the cost of making interest-only repayments for the first five years of their home loan, compared to making principal and interest repayments from the start. James and Elle are ready to purchase a home. Interest-only repayments scenario: James and Elle buy a home So if you’re contemplating making interest-only repayments on your mortgage, you’ll want to crunch the numbers first and familiarise yourself with all of the elements involved. Interest-only mortgages aren’t without their drawbacks though, as they may well prove a more expensive option over the long-run. That’s because - during the interest-free period - mortgage holders will only be required to pay off the ‘interest’ part of the loan, rather than both the interest and the loan principal (i.e. Which lender should you go with? How much do you need to borrow? Should you fix or go with a variable rate? Those are all important considerations, but so too is the type of repayments you want to make on your loan: principal and interest (P&I) repayments or interest-only (IO) repayments?įor some borrowers, going interest-only for a set period of time is a convenient way to ease themselves into the loan by initially making lower repayments. When it comes to taking out a home loan, there are plenty of choices to make. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo. While we pride ourselves on covering a wide range of products, we don't cover every product in the market. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. Mozo provides general product information. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Different amounts and terms will result in different comparison rates. *WARNING: This comparison rate applies only to the example or examples given. ^See information about the Mozo Experts Choice Home loans Awards
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |