PRINCIPAL & INTEREST
LOANS PERTH

A Principal & Interest Loan is one of the most common types of home loans available to Australians. When you take out this type of loan, your repayments are made up of two key parts: the principal (the original amount borrowed) and the interest (the cost of borrowing that money). 

Over the life of the loan—usually around 25 to 30 years—you gradually pay off both the principal and the interest, eventually owning your home outright. This predictable repayment structure can be ideal for many homeowners looking for stability and long-term equity growth.

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

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How Principal &
Interest Loans Work

When you choose a Principal & Interest Loan, each of your monthly repayments will go towards reducing the amount you owe (the principal) as well as paying the interest accrued. As time progresses, more of each repayment will go towards paying down the principal, and less towards interest. This is because the interest is calculated on the outstanding principal balance, which decreases over time as you make payments.

If you borrowed $500,000 with a Principal & Interest Loan at a rate of 6% per annum, your monthly repayments might be $2,387 over a 30-year term. Initially, a larger portion of each payment will cover the interest, but over time, more will go towards reducing the principal amount owed.

Advantages of
Principal & Interest Loans

Equity Building: Every repayment helps reduce the amount owed on your loan, building equity in your home. This can be especially beneficial if property values increase over time, as it means your asset is growing.

Predictable Repayments: Unlike some other loan types, Principal & Interest Loans have a stable repayment schedule. This predictability helps with budgeting, giving homeowners peace of mind when planning their finances.

Full Ownership: By repaying both the principal and interest, you are on a direct path towards owning your property outright. This makes Principal & Interest Loans particularly appealing to those who see their home as a long-term asset.

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
a Principal & Interest Loan

Principal & Interest Loans are well-suited for a wide range of borrowers:

First-Time Home Buyers: This loan type is ideal for individuals who want a clear path to homeownership, with predictable repayments that can be managed within a monthly budget.

Investors: If you are an investor looking to gradually build equity, a Principal & Interest Loan may make sense. While repayments are higher than Interest-Only Loans, the equity growth can be beneficial in the long term.

Homeowners with Long-Term Goals: If your goal is to eventually own your home outright, Principal & Interest Loans are a straightforward way to achieve that.

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Incentives for Principal
and Interest Loans

In Western Australia, there are several unique considerations and incentives that may influence your decision to choose a Principal & Interest Loan:

First Home Owner Grant: If you’re buying your first home in WA, you could be eligible for the First Home Owner Grant (FHOG), which provides a financial boost towards purchasing or building a new home. Opting for a Principal & Interest Loan means that you can take full advantage of this grant while paying down your property over time.

Stamp Duty Concessions: First-time buyers in WA may also benefit from concessions or exemptions on stamp duty, making Principal & Interest Loans an affordable pathway to homeownership.

Why Choose Loan Monster for Your
Principal & Interest Loan?

At Loan Monster, we understand that choosing the right mortgage can be a daunting task. Our team of experienced Perth-based mortgage brokers are here to help you navigate the complexities of Principal & Interest Loans. We take pride in our ability to offer personalised service that meets your unique needs, and our strong relationships with lenders mean we can help you secure competitive rates.

Our local expertise is what sets us apart. We know the WA market inside out and understand the unique opportunities and challenges faced by borrowers here. Whether you’re a first-time buyer or looking to refinance, Loan Monster is committed to finding a solution that works for you.

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 Are Principal & Interest Loan Repayments Calculated?

Repayments are calculated based on the total amount borrowed, the interest rate, and the loan term. Each payment goes towards reducing the principal amount and covering the interest accrued.

Can I Switch from an Interest-Only Loan to a Principal & Interest Loan?

Yes, many lenders allow borrowers to switch from an Interest-Only to a Principal & Interest repayment plan, often at the end of the interest-only period.

What Happens If I Want to Pay Off My Loan Early?

Many lenders allow early repayment, but it’s important to check for any potential exit fees or penalties. At Loan Monster, we can help you understand the terms and find flexible loan options.

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Today

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