Log in / Sign up

Get in touch with one of our experts who can answer all your home loan related questions.

We love feedback!

Back to Inspire Home

Are you ready to pay more when your interest-only period ends?

Buying a house is one of the biggest investments people make and a 25 year mortgage is a long commitment but a surprising number of Australian homeowners don’t really understand the ins and outs of how their home loans work, particularly when it comes to interest-only terms.

How much can you save by refinancing?

Find out what your new repayments might be in seconds.

Find a deal now

Can you afford to pay $7,000 more each year?

Around $480 billion in interest-only loans are set to expire in the next four years and the RBA estimates a borrower with an interest-only loan of $400,000 will face an increase in repayments of $7,000 per year when their loan switches to principal and interest.

What Australians don't know about their home loans

Naturally, there has been a lot of industry talk about how households will manage their mortgage repayments once their loans switch to principal and interest but we wanted to know what households thought. We wanted to delve into the topic and find out just how much Australians actually knew about interest-only terms so we surveyed 2,500 homeowners.

The results showed that:

  • 30% of homeowners did not know that interest-only loans attract a higher interest rate than principal and interest loans
  • 39% of homeowners did not know when their interest-only period expires or what their P&I repayments would be
  • 30% of homeowners did not know that by using an interest-only period, they would pay more interest over the life of the loan

How much can you save with an offset account?

Find out how much you could save each month.

Calculate savings

Can you avoid this increase?

You can certainly get on the front foot. Switching your repayments to P&I early, before your interest-only period expires, will mean that you'll pay less interest over the life of your loan. Plus, P&I rates are low right now.

This is also a lost opportunity for borrowers according to Lendi co-founder and managing director, David Hyman; “Lenders are offering very competitive rates on principal and interest loans, sometimes up to a whole percent lower than their interest-only rates, so there are significant long-term savings to be made if you can afford to switch to principal and interest.

"The research highlights the need for homeowners to do more research and get more guidance so they can better understand their options when choosing a mortgage. Otherwise, they might end up paying much more than they need to over the life of their loan."

"We know cash flow is the most common reason people choose interest-only over principal and interest repayments so being across basic details such as when your interest-only period expires and what your repayments will be are critical for forward planning and managing expenses, particularly unexpected expenses."

Read our ultimate guide to refinancing your home loan.

Calculate your monthly home loan repayments

Find out if you can save with a lower interest rate.

Calculate now

Can you save by switching to P&I early?

Generally yes, the sooner you switch to P&I the less interest you'll pay over the life of your loan.

The longer you leave your repayments on interest-only, the higher your repayments will be when you do eventually switch and this could add significant strain to those already experiencing cash flow issues.

Hyman continues; “Homeowners need to manage their loans proactively rather than taking a set and forget approach.

Check in with a Home Loan Specialist to make sure you understand your home loan terms and find out how you could save on your home loan.

*Online survey of 2,500 Australian property owners, conducted June 2018.

Want free expert advice on your home loan?

Our experts are ready to help. Chat to one of our Home Loan Specialists at a time that suits you.

How much equity can you access?

$

Don't know your property value?
Get a free property report

$

Tags: interest only, interest only period, interest only repayments

Get a free property report in seconds

Search an address for price estimates and sales history.

Search a property

Check today's low rates

Tell us what you are looking for and see if you can save.

Search rates
How much is your home worth?

How much is your home worth?

Get a free online property valuation with local sale and suburb statistics.

Get your property report

Important legal stuff

COMPARISON RATE WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years.
Lendi is the trading name of Lendi Pty Ltd, a related body corporate of your licensed credit assistance provider, Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence Number 442372). We will never sell your email address to any third party or send you nasty spam, promise.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of major and non-bank lenders including Click Loans which is a wholly owned subsidiary of Auscred Pty Ltd and a related body corporate of Auscred Services, your credit assistance provider. Although Lendi compares over 1600 products from over 30 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
Made with love at Circular Quay in Sydney, Australia. © 2019. All rights reserved.