If you have an interest only loan or rely on one to keep the wheel turning, then it’s time to rethink your financial strategy. 

Interest only loans are dying products and it is getting harder and harder to obtain. The banks and government are placing tighter restrictions on it to make it harder for people to obtain it or extend the terms if you have one expiring soon.

Interest only loans is a great tool for many home owners and property investors alike because it helps greatly with cash flow.  However, paying the minimum has it’s pros and cons and here are some of them.

Pro:

• Pay minimum repayment or pay more if you have the funds into loan or offset account;
• Cash flow flexibility – choose when to pay more or less depending on your expenses per month;
• Allows you to access your savings whether it’s in your offset account or home loan account (if you have any put aside in your loan or offset account);

Con:

• No reduction to the principal portion of your loan (if you don’t put any extra money into loan or offset);
• Spike in monthly repayment when interest only term is over rolling into principal and interest;
• May cause over spending – ie. the savings in loan/offset could be spent uncontrollably;

 

Interest only loans are not for everyone, it’s more expensive to own and will get even more expensive in the near future.

The best way to find out if your current loan structure is right or safe for you is to get a lending analysis done with our consultants. We offer a free lending assessment either over the phone or in person to help you work out where you stand currently and in the near future should things change.

Contact us today.