INTEREST-ONLY
LOANS PERTH

An interest-only loan allows you to make repayments that only cover the interest portion of your mortgage for a set period, typically between 1 to 5 years. During this period, your monthly repayments are significantly lower compared to a standard principal and interest loan. However, once the interest-only period ends, your repayments will increase as you begin to pay off both the principal and interest.

(Disclaimer: The information presented on this page is not financial advice. Contact Loan Monster for an accurate estimation)

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How Interest-Only
Loans Work

If you had a $400,000 loan at an interest rate of 4%, your monthly repayment during the interest-only period would be $1,333. After this period, you will need to start paying off the principal, which could see your monthly repayments increase significantly. This loan structure can be especially suitable for property investors or those expecting a future increase in income.

Advantages of
Interest-Only Loans

Interest-only loans come with several advantages, making them a popular choice for specific types of borrowers:

Lower Repayments During the Interest-Only Period: By paying only the interest for a limited time, you reduce your monthly expenses. This flexibility can be helpful if you need to manage cash flow, such as during the initial stages of property investment.

Maximise Cash Flow for Property Investment: If you are an investor, interest-only loans can help you maximise your cash flow, allowing you to put funds towards other investments or property improvements.

Tax Benefits for Investors: Interest payments on an investment property can often be tax-deductible, providing an extra incentive for investors to opt for this type of loan.

Short-Term Flexibility: If you plan to sell the property before the interest-only period ends, you could benefit from lower repayments without needing to worry about the long-term costs of paying down the principal.

In Western Australia, investors can leverage these loans to take advantage of Perth’s current rental market, which is seeing high demand and increasing rental yields.

Drawbacks to Consider

While Principal & Interest Loans offer numerous benefits, there are also some drawbacks to consider:

Higher Monthly Repayments: Compared to Interest-Only Loans, Principal & Interest Loans come with higher monthly repayments. This can put pressure on your monthly budget, especially if you’re just starting out or facing other financial commitments.

Less Cash Flow Flexibility: Since you are paying down both the principal and the interest, there is less flexibility compared to Interest-Only Loans. This could limit your ability to free up cash for other investments or expenses in the short term.

Commitment to Long-Term Payments: Principal & Interest Loans involve a long-term commitment, often spanning 25-30 years. If your financial circumstances change, such as losing income or encountering unexpected expenses, the repayment obligations can become challenging to manage.

Our role at Loan Monster is to help you weigh these risks and ensure you understand the full picture before making any commitments.

Who Should Consider
an Interest-Only Loan

Interest-only loans aren’t for everyone. To help you decide if this type of loan suits your needs, consider the following questions:

  • Are you an investor looking to maximise cash flow in the short term?
  • Do you expect your income to increase significantly in the next few years?
  • Are you planning to sell the property before the interest-only period ends?

If you answered yes to these questions, an interest-only loan could be a good fit for you. However, it’s crucial to understand the potential risks involved, and that’s where Loan Monster comes in. We provide personalised, one-on-one consultations to help you determine if this is the best option for your situation.

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Why Choose Loan Monster for Your
Interest-Only Loan?

Choosing the right mortgage broker is just as important as choosing the right loan. Here’s why Loan Monster is the best choice for interest-only loans in Perth and WA:

Local Knowledge: We have extensive knowledge of WA’s unique property market and regulatory environment. This local expertise allows us to offer advice that is truly relevant to your needs.

Customised Solutions: We take the time to understand your goals and create tailored solutions. Whether you’re an investor or a first-time buyer, we’re here to find the best loan for you.

Wide Range of Lenders: Loan Monster partners with a wide range of lenders, giving you access to a variety of interest-only loan products. This means we can compare options and negotiate the best rates on your behalf.

Our clients trust us to guide them through the complexities of interest-only loans, and we deliver results. Just ask one of our recent clients, who used an interest-only loan to invest in a rental property in Perth’s growing suburbs. They were able to keep their monthly repayments low while using the extra cash flow to upgrade the property, ultimately increasing its rental value.

Frequently Asked Questions

We’ve answered some of the more common questions that we get with regards to principal and interest loans, for your convenience.

How long can I have an interest-only period?

The interest-only period typically lasts between 1 to 5 years, but some lenders may offer longer terms depending on your financial circumstances.

Are interest-only loans risky?

Interest-only loans can be riskier compared to standard loans because of the higher repayments that follow the interest-only period and the increased total interest paid over the life of the loan. It’s important to fully understand these risks and plan accordingly.

Can I switch from an interest-only loan to a principal and interest loan?

Yes, you can switch from an interest-only loan to a principal and interest loan. However, you may need to meet certain criteria, and switching could impact your repayments. Talk to us at Loan Monster to understand your options.

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Today

We’re here to help you in any way we can. We want you to know all of your options and help you get the right loan for you. Contact us and we’ll see what we can do. We’ll always get back to you within 24 hours, even on the weekends.

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