What is the difference between principal and interest repayments and interest only repayments?
Principal and interest repayments allow you to pay off both your principal loan, and the interest accrued on top of it within the arranged time frame.
With interest only repayments, you only pay off the interest accrued on the loan, and not the principal amount. This can only be done for a limited period, usually 5 years for owner occupiers and 10 years for investors. It is important to note that interest only repayments do not reduce any of your outstanding loan balance. At the end of the interest-only period, you will still need to repay the whole loan amount, plus any further interest, within the agreed time frame.