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Principal and interest or interest only?

Principal & interest is the most common type of home loan. This involves making repayments which pay down some of the principal balance plus the interest accrued.

However, some people opt for an interest only loan period. This involves making repayments for a set time (usually 1-10 years) which are lower than principal and interest repayments as they only cover the interest being accrued and none of the principal.

You might choose an interest only loan period if you know your budget is going to be tight for a few years, or in the case of property investors, for taxation or equity building purposes.

If you go down this road though, you’ll need to make sure you budget for the end of the interest only period, as your loan will then switch back to the higher principal and interest repayments.

Found in:

  • Loan features
  • Home loans explained

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Legal information about our rates
Our home loans are subject to credit criteria and eligibility requirements. Home loan interest rates are for new customers only and can change. Our comparison rates are based on a $150,000 loan amount over a 25 year term. They factor in fees associated with applying for the loan; ongoing fees and fees associated with leaving the loan. Our fixed loans roll to a variable principal and interest rate at the end of the fixed term. If the interest only period is not specified, the comparison rate is calculated on a one year period.

WARNING: The comparison rates are true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Tiimely Turnaround™
^Our turnaround times are up to 2x faster than the industry, based on a comparison of our average platform submit to approval time compared to industry submit to approval time, published here  (June 2023). Customer turnaround times are dependent on individual circumstances and may require an assessor to obtain more information.

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At Tiimely Home we are not financial advisers and recommend seeking independent financial and legal advice to check how the information we provide aligns with your individual circumstances.