Compare interest only home loans from 5.74%

Find some of the lowest interest only home loans available in the market today.

Brooke Cooper
Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.43% p.a.
6.68% p.a.
$2,143
Interest-only
Variable
$0
$530
90%
6.43% p.a.
6.68% p.a.
$2,143
Interest-only
Variable
$0
$530
90%
  • 10% deposit minimum
  • Up to 30 yrs loan term
  • Interest Only during construction
6.54% p.a.
7.43% p.a.
$2,180
Interest-only
Variable
$10
$450
80%
6.54% p.a.
6.49% p.a.
$2,180
Interest-only
Variable
$0
$835
70%
6.54% p.a.
6.56% p.a.
$2,180
Interest-only
Variable
$0
$210
70%
6.69% p.a.
6.86% p.a.
$2,230
Interest-only
Variable
$390
$0
80%
6.54% p.a.
6.66% p.a.
$2,180
Interest-only
Variable
$299
$299
80%
6.72% p.a.
6.42% p.a.
$2,240
Interest-only
Variable
$10
$690
90%
5.74% p.a.
6.42% p.a.
$2,147
Interest-only
Variable
$0
$600
60%
5.84% p.a.
5.91% p.a.
$1,947
Interest-only
Variable
$0
$600
95%
6.39% p.a.
6.40% p.a.
$2,130
Interest-only
Variable
$0
$180
80%
6.29% p.a.
6.36% p.a.
$2,097
Interest-only
Variable
$0
$895
60%
6.19% p.a.
6.47% p.a.
$2,063
Interest-only
Variable
$0
$0
80%
6.34% p.a.
6.41% p.a.
$2,113
Interest-only
Variable
$0
$895
70%
6.39% p.a.
6.72% p.a.
$2,130
Interest-only
Variable
$395
$0
90%
6.42% p.a.
6.44% p.a.
$2,140
Interest-only
Variable
$10
$690
90%
7.79% p.a.
7.49% p.a.
$2,597
Interest-only
Variable
$0
$160
80%
6.98% p.a.
7.05% p.a.
$2,327
Interest-only
Variable
$395
$200
60%
7.26% p.a.
7.07% p.a.
$2,420
Interest-only
Variable
$8
$0
60%
Featured
9.42% p.a.
9.55% p.a.
$3,140
Interest-only
Variable
$8
$600
80%
More home loans
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) & interest only (IO) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

What is an interest-only home loan?

A typical home loan repayment consists of two parts:

  • Principal
    The portion that goes towards repaying the borrowed funds

  • Interest
    The portion that's charged to a borrower utilising the funds

Mortgage holders with an interest only home loan are only required to make payments to cover the 'interest' part of the loan.

For that reason, the repayments on an interest only mortgage are generally smaller than than they would be if a borrower was making principal and interest (P&I) repayments.

Typically, a bank or lender will only allow a borrower to make interest only repayments for an agreed period of time, usually between three to five years.

On top of that, interest rates for tend to be higher on interest only home loans than on P&I home loans.

If you're considering taking on an interest only home loan, it's worth doing your research on all that's involved before deciding whether it will suit your needs and circumstances.

Interest only home loans for investors

Interest only home loans are generally the domain of property investors. As interest on an investment home loan is tax deductible, an investor might expect to maximise their cash flow in the short term by making interest only repayments and grow their capital wealth in the long term thanks to rising property prices.

See also: What tax deductions can you claim on your rental property?

Interest only home loans for owner occupiers

On the other side of the coin, some borrowers might turn to an interest only home loan in an effort to minimise their repayments when experiencing hardship. There is a downside to doing so: the balance of their home loan will stay the same during an interest-only period, meaning they'll be left with more to repay later.

Interest only home loans might also prick the ears of a 'house flipper' - one who buys a less-than-perfect abode and renovates it to some degree before selling it for (hopefully) more than they paid. Since such a homeowner mightn't plan to ride out the capital gains wave, they could choose to funnel extra cash flow into repairs and renovations rather than pay off their debt.

What happens when an interest only loan expires?

Like most anything, an interest only home loan won't last forever.

When the time comes, your interest only loan will automatically roll over to principal and interest repayments. At that point, you'll start paying off the amount you borrowed, as well as the interest.

If your interest only loan period is ending, there are three main options you might consider going forward:

  1. Extend the interest-only period
    Your lender may be willing to extend your interest only period in order to keep you as a customer.

  2. Prepare for P&I repayments
    You might wish to get your ducks in a row ahead of making the switch to principal and interest repayments.

  3. Refinance
    If you've done your research and found a better rate on the market, you might want to think about refinancing your home loan in order to extend your interest only period or secure a lower interest rate (or both).

How long does an interest only period last?

Lenders typically offer interest only periods of between one and five years.

However, if you have a chat with your lender, they may be able to offer you a longer interest only period. Though, long stints are generally reserved for property investors.

Pros and cons of interest only home loans

No matter what type of home loan you decide to take out, it's always a good to weigh up the pros and cons involved.

Below is a list of some of the benefits and risks you could encounter when taking out an interest-only home loan.

Advantages of interest only mortgages

  • Lower repayments
    Interest only repayments will be lower than principal and interest repayments on the same loan, potentially offering borrowers greater cash flow. Interest only loans can also help homeowners experiencing financial hardship or a temporary reduction of income.

  • Tax incentives for investors
    Property investors can deduct home loan interest from their taxable income, which might attract many to interest only home loans.

Disadvantages of interest only mortgages

  • Repayments will eventually revert
    An interest only home loan can only last for so long, and a borrower will need to be confident they can manage principal and interest repayments when it expires.

  • Higher interest rates
    Interest only home loans generally attract higher interest rates than traditional home loans.

  • More interest to pay
    A borrower with an interest only home loan will also end up paying more interest over the life of their loan than they would otherwise. This is because, when a borrower repays a portion of their principal balance, they no longer pay interest on that portion.

  • Less equity buildup
    A person making interest-only home loan repayments won't be gradually gaining ownership of their property from their lender. This also means that if the property's value falls, they could find themselves owing more than the property is worth more quickly than their principal-and-interest-paying peers.

How to compare interest only home loans

The first step of comparing various home loans is always the same: think long and hard about your property market intention and strategy before identifying a home loan that will align with it.

For instance, if you wish to buy an investment property in an area you believe will experience notable capital growth in the near term, but don't necessarily value paying down your principal balance, a low-rate interest only home loan might be right for you.

However, if you're an owner occupier who eventually wants to own your home outright, making principal and interest repayments is likely a better option. You might even seek out a home loan that allows extra repayments to speed up the process.

It's worth remembering that lenders generally charge higher interest rates on interest only home loans than they do on traditional mortgages.

You can turn to our handy comparison table above to compare many of the most competitive interest rates available on the market right now.

Once you've worked out the interest rate you might be able to secure, use our mortgage repayment calculator to estimate the size of your repayments and the impact an interest only period would have on your finances.

From there, you can make an informed decision on whether one home loan is more suited to your needs than another.

Exploring Interest Only Home Loans: Features and Benefits

LLearn more about interest only home loans to understand their unique traits.

Understand the difference between paying off both the loan amount and interest versus just the interest, and grasp how each option affects your finances.

Discover the three main advantages of interest only loans, including potential cash flow improvements and greater flexibility in managing your money.

Before You Decide: Things Interest Only Borrowers Should Think About

It's important to weigh up these factors before committing to an interest only home loan.

Check your credit rating to better understand your financial situation and how likely you are to be approved for a loan.

Stay up to date on current interest rates in Australia in order to make informed decisions about your loan.

Carefully consider how you will balance flexibility in your repayments and the interest rate you'll pay.

Use Your Mortgage’s mortgage repayment calculator to estimate your repayments and plan your finances accordingly.

Frequently Asked Questions

Find answers to the most frequently asked questions about interest only home loans.

Lenders usually require a 20% home loan deposit for interest only loans. While borrowers can opt to apply for an interest only loan with a higher loan-to-value ratio (LVR), the approval will ultimately depend on the assessment of the lender.

If you are approved with a less than 20% deposit, your home loan provider will likely charge you with Lenders Mortgage Insurance (LMI).

Yes, it’s possible to make extra repayments on an interest-only home loan.

Additional payments on top of your monthly repayments during the interest only period will reduce the principal amount of your home loan.

Interest Only Home Loan News & Guides

Be more knowledgeable about interest-only home loans through these related posts & articles.

Home Loan Lenders

loans.com.au Home Loans NAB Home Loans homeloans.com.au Home Loans IMB Bank Home Loans Westpac Home Loans Macquarie Home Loans Commonwealth Bank Home Loans ANZ Home Loans Suncorp Home Loans Bank of Melbourne Home Loans Bank Australia Home Loans Unloan Home Loans
...

Get help finding
the right home loan

Not sure which type of loan is best for your needs?
Your Mortgage can help you find out.

Compare Home LoansGet help from a home loan specialist