Compare Interest-only Home Loans

Rates and fees last updated on

Interest-only home loans might be tougher to get, but great deals still abound for those who know where to look.

APRA's recent clampdown on interest-only lending means it's getting harder to find the products, which makes comparing your home loan options all the more important. There are still plenty of great interest-only home loans available.

Compare our interest-only home loans in the table below

*Many of the loans in the table below offer interest-only options but may come with higher interest rates than those displayed. You can compare interest-only home loans for both owner-occupiers and investors.

State Custodians Low Rate Home Loan

State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Owner Occupier, IO)

4.04 % p.a.

variable rate

4.07 % p.a.

comparison rate

State Custodians Low Rate Home Loan

The State Custodians Low Rate Home Loan is a variable rate loan with 100% offset account and no application or ongoing fees.

  • Interest rate of 4.04% p.a.
  • Comparison rate of 4.07% p.a.
  • Application fee of $0
  • Maximum LVR: 80%
  • Minimum borrowing: $100,000
  • Max borrowing: $2,000,000
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Rates last updated December 17th, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
4.04%
4.07%
$0
$0 p.a.
80%
A competitive rate with no application or ongoing fee.
4.13%
4.13%
$0
$0 p.a.
80%
Enjoy a competitive variable rate from UBank.
4.70%
4.42%
$600
$8 monthly ($96 p.a.)
80%
Save money on a basic home loan that offers free redraw and a high maximum LVR.
4.96%
5.35%
$0
$395 p.a.
95%
Get a discount off the standard variable rate and pay interest only repayments.
4.46%
4.39%
$0
$0 p.a.
80%
A standard variable home loan with interest only repayments.
4.04%
4.07%
$0
$0 p.a.
80%
Access the equity in your home with a competitive interest-only rate and no application fee.
5.17%
5.21%
$0
$395 p.a.
80%
Enjoy a low interest rate home loan with a 100% offset account and redraw facility.
4.14%
4.45%
$0
$299 p.a.
80%
A fully featured home loan with an offset account and discounts available.
4.49%
5.16%
$600
$8 monthly ($96 p.a.)
95%
Borrow up to 95% LVR with low ongoing fee and 100% offset account facility.
4.09%
4.48%
$0
$248 p.a.
80%
4.56%
4.28%
$0
$0 p.a.
90%
A basic package loan with a competitive rate and no ongoing fees.
4.84%
5.00%
$600
$8 monthly ($96 p.a.)
95%
Borrow up to 95% LVR with extra repayments allowed.
5.05%
5.07%
$0
$0 p.a.
95%
A Simplifier Home Loan with no application fee or ongoing fee.
5.21%
5.59%
$0
$395 p.a.
95%
Enjoy zero establishment fees and discounts on a range of St.George products.

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UBank UHomeLoan Variable

UBank UHomeLoan Variable Rate - Standard Variable Rate (Investor with Investor Offer Interest Only)

4.44 % p.a.

variable rate

4.44 % p.a.

comparison rate

UBank UHomeLoan Variable

Enjoy the low variable interest rate with no application or ongoing fees.

  • Interest rate of 4.44% p.a.
  • Comparison rate of 4.44% p.a.
  • Application fee of $0
  • Maximum LVR: 80%
  • Minimum borrowing: $100,000
Go to site
Rates last updated December 17th, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
4.44%
4.44%
$0
$0 p.a.
80%
Pay interest only repayments with this special offer for investors.
4.34%
4.87%
$0
$0 p.a.
80%
Lock in a low 2-year fixed rate with this interest-only investment loan.
3.98%
3.98%
$0
$0 p.a.
70%
A competitive investment loan with a low rate that requires a 30% deposit.
4.38%
4.93%
$0
$0 p.a.
80%
Fix your rate for 1 year and make interest-only payments.
5.35%
5.44%
$0
$395 p.a.
80%
An interest-only variable rate investment loan that lets you earn reward points.
4.39%
4.83%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.49%
5.85%
$300
$10 monthly ($120 p.a.)
80%
A flexible fixed rate loan for investors.
4.69%
5.56%
$0
$395 p.a.
90%
This 2-year fixed rate investment loan is also interest-only.
5.40%
5.76%
$0
$395 p.a.
95%
A fixed rate interest-only loan with package discounts on other financial products.
4.69%
5.00%
$0
$299 p.a.
80%
A loan with no application fee and borrow up to 95% LVR.
4.69%
5.02%
$0
$350 p.a.
90%
This fixed rate interest-only loan for investors has no application fee.
4.49%
5.48%
$0
$350 p.a.
80%
Interest-only investment loan with a 2-year fixed period. New customers only.
4.69%
5.50%
$0
$395 p.a.
95%
Fix your rate and make interest only payments for 3 years with this investment loan.
4.64%
$700
$200 p.a.
90%
Repayments and rate lock are available with BankSA Portfolio Home Loan - 3 Year Fixed.
4.64%
5.62%
$600
$8 monthly ($96 p.a.)
90%
Borrow up to 95% LVR with low ongoing fee and 100% offset account facility.
4.64%
$700
$200 p.a.
90%
Use the equity in your home to fund an investment property and enjoy a fixed interest-only rate for 3 years.
5.59%
$0
$395 p.a.
95%
Borrow from $500000 up to $749999.
6.44%
7.19%
$1,500
$12 monthly ($144 p.a.)
70%
A fixed rate loan with partial offset account.

Compare up to 4 providers

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How do interest-only home loans work?

Interest-only loans differ from standard home loans in the way they're repaid. Traditional principal and interest home loans have repayments that include both the interest and a small proportion of the principal. Interest-only home loans, on the other hand, repay only the interest portion of the loan for a fixed period, usually up to five years. While you make interest-only repayments you won't be reducing the principal, but you will reduce the size of your monthly repayment.

Watch: Interest-only home loans explained

Hear the industry experts (listed below) share some thoughts around interest-only loans:

Can I still get an interest-only home loan?

The short answer is yes, but there are a few things you can do to give yourself the best chance of success.

The Australian Prudential Regulation Authority (APRA), the body that regulates Australian banks, has put a 30% cap on new interest-only lending. That means interest-only loans can only account for 30% of all the new home loans written by banks. You'll be competing against a lot of other investors to be part of that 30%.

With that in mind, there are some things you can do to help your chances:

  • Have a bigger deposit. Many banks are more willing to consider an interest-only home loan if you have a lower loan-to-value ratio (LVR). A bigger deposit, usually at least 20%, will make you a more attractive borrower.
  • Have a plan. Lenders will want to know why you want an interest-only home loan versus a principal and interest loan. If you can explain your justification for the loan and demonstrate your investment plans, you'll be in a much better position.
  • Consider a non-bank lender. Non-bank lenders are unique in that they raise funds through wholesale markets rather than customer deposits. Because of this, they're not held to the same capital requirements as banks. While non-banks are regulated and have to abide by responsible lending obligations, they're not restricted by the same concrete speed limit on interest-only lending.

Why would I want an interest-only home loan?

Interest-only loans can be an option for some investors. Investors will usually use interest-only loans to purchase a property and make minimal repayments. Many investors use this strategy because interest payments on an investment home loan are tax deductible. Investors choose interest-only home loans to minimise their monthly repayments while maximising cash flow and tax effectiveness.

Interest-only loans are a popular strategy for property investors who are expecting to see strong growth in the value of their property. Savvy investors buying the right property at the right time can make minimal repayments with an interest-only loan and then sell the property before they start paying off the principal. The risk with this strategy is that if property prices fall you'll have negative equity.

What if I'm an owner-occupier?

Interest-only home loans may not be a great option for owner-occupiers. Most owner-occupiers who choose the products do so to minimise their monthly repayments. This is why banks are very hesitant to agree to an interest-only home loan for an owner-occupier. If you can't afford to make principal and interest repayments on your home loan, it's likely that you've borrowed more than you can afford.

One of the main dangers of owner-occupiers using an interest-only home loan is that the repayments can rise dramatically when the loan reverts to principal and interest. In the meantime, you won't be making headway on paying down your debt. Owner-occupiers should think very carefully before choosing these products.

What are the pros and cons of interest-only loans?

Pros

  • Lower repayments. With an interest-only mortgage, you'll have lower repayments compared to a comparable principal and interest loan. This is because you're not paying the principal aspect of the home loan.
  • Tax savings. If you're an investor, your repayments may be tax-deductible, particularly if you use a 100% offset account. This is because interest on funds withdrawn from an offset account rather than redrawing from your home loan are tax deductible.

Cons

  • Need to refinance. Interest-only periods generally last about 5 years, after which you might have to refinance to another lender if you wish to continue making interest-only payments
  • Market risk. There can be higher risk than principal and interest loans as you're not building equity in the property, meaning if property values decrease you could end up owing more than your property is worth.

Interest only infographic

What do the experts say about interest-only loans?

Industry experts reveal the risks of interest-only home loans.

Andrew Tan

Co-founder, Masters Broker Group

The risk is that borrowers fall into the trap of only making the interest repayment, with no strategy of paying any of the principal off. This may happen when borrowers take out a line of credit mortgage where the minimum repayment is the interest-only.

In a standard term loan, when the interest-only period ends, borrowers also need to budget for the additional repayment as they switch from interest-only to principal and interest.

Jessica Darnbrough

Head of Corporate Affairs, Mortgage Choice

While there are many benefits/advantages associated with having an interest-only loan, there are also some disadvantages. For owner occupiers the biggest disadvantage with an interest-only loan is that it stops you from making any headway on your overall mortgage debt.

While interest-only loans are popular with investors because they allow them to minimise their mortgage repayments and increase their tax advantages, it is generally a good idea for owner occupiers to have a principal and interest home loan product because it ensures they pay off their non-tax deductible debt.

Stuart Pullar
Stuart Pullar

Principal of Mortgage Choice, Ashgrove

Another consideration of this loan type is if the borrower has continued to make the minimum interest-only repayments and hence not contributed anything towards the principal loan amount, they will not have built up any equity, unless the property has increased in value.

Interest-only loans are popular among investors. This is generally because the interest on a loan may be tax deductible depending on your personal situation. As the interest on an owner-occupied property loan is not tax deductible, it’s generally better to pay this down as quickly as possible. In saying this though, there are cases where interest-only loans for owner-occupied properties may be appropriate as part of an overall financial strategy, for example when using the extra funds elsewhere such as paying down more expensive debts, or using the funds for renovations instead of borrowing additional money.

Connect with Stuart: view his blog

How can I find the best interest-only home loan?

There's no one best interest-only home loan, but there are different ways to find out if a home loan is the right one for you. You should compare interest-only home loans on:

  • Fees. You might be looking for an interest-only home loan with low upfront and ongoing fees.
  • Interest rates. Interest rates are slightly more important when comparing interest-only home loans as there's no principal repayment, meaning the full amount of your interest repayments will rely on the interest rate you're paying.
  • Features. Many borrowers opting for interest-only home loans also opt for 100% offset accounts, as they can be used to realise tax savings. Other features such as the ability to make extra repayments, bring your loan with you to a new property, or split your loan into fixed and variable portions might be important.

I have a few more questions about interest-only loans

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This page was last modified on 28 November 2017 at 1:10pm.

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28 Responses

  1. Default Gravatar
    MarcSeptember 18, 2017

    What is your best investment comparison rate interest only for loan of 1.14 million thanks

    • Staff
      RenchSeptember 20, 2017Staff

      Hi Marc,

      Thanks for your inquiry. Please note that we are not affiliated with any company we feature on our site and so we can only offer you general advice.

      Unfortunately, we can’t actually recommend a specific provider or say what is best. You can also have a look on this page to compare your options and see more info.

      Cheers,
      Rench

  2. Default Gravatar
    KyawJuly 25, 2017

    Can I borrow moneys?

  3. Default Gravatar
    MichaelMay 29, 2017

    1) Can i get 5 years interest only loans for construction of house & Land packages for Residential homes for investment purposes.
    2) Also what is the best rate for this type of loan

    • Staff
      AnndyMay 30, 2017Staff

      Hi Michael,

      Thanks for your question.

      Interest-only periods generally last for 5 years and you can use them for owner-occupier of investment purposes.

      In the above page, the lowest comparison rate that I can see is 3.72%. Kindly note that the comparison rate takes into account some of the fees and charges of a home loan to give you a more accurate representation of a loan’s interest rate once the costs are taken into account.

      If you need assistance in finding the best option for your situation, you may also get in touch with a mortgage broker by filling out our online form above.

      Cheers,
      Anndy

  4. Default Gravatar
    tomApril 2, 2017

    With interest only loans, can you make lump sum payment (for example if you inherited some money) into the loan to reduce the monthly interest payments or do the interest only payments relate to the loan amount for a fixed term?

    • Staff
      MayApril 2, 2017Staff

      Hi Tom,

      Thank you for your question and for contacting finder.com.au – we are a financial comparison website and general information service we are not mortgage specialists so can only offer general advice.

      That would depend on the lender you go with and the term of payments you have with them. So it’s best that you contact the lender directly to confirm if you can make a lump sum payment and how they would treat such payment.

      Cheers,
      May

  5. Default Gravatar
    LyndaJune 15, 2015

    Can a line of credit account be secured against anything else but a home mortgage, e.g. secured against your super fund?

    • Staff
      JodieJune 15, 2015Staff

      Hi Lynda,

      Thank you for contacting finder.com.au, a financial comparison website.

      There are line of credit loans available as a personal loan rather than a home loan, please visit this page to find out more, in terms of home loans it would be best to speak to a lender directly as they each have their own lending criteria.

      There is a selection of line of credit home loans available from different lenders that you can contact to discuss your needs.

      Regards
      Jodie

  6. Default Gravatar
    rosemaryMay 14, 2015

    do you have interest only home loans

    • Staff
      MarcMay 14, 2015Staff

      Hi Rosemary,
      thanks for the question.

      This page compares a range of interest only home loans which you can enquire with the lender directly for more information.

      Cheers,
      Marc.

  7. Default Gravatar
    AntonioMay 7, 2015

    I’d like to know the best interest rate for interest only loan, for a period of 3 years. Cheers.

    • Staff
      JodieMay 12, 2015Staff

      Hi Antonio,

      Thank you for your question.

      You have come through to finder.com.au, a financial comparison website, please use the above table with your loan details to see what current interest rates are offered for a 3 year fixed rate loan of the amount you are wanting to borrow.

      Regards
      Jodie

  8. Default Gravatar
    ClaireApril 28, 2015

    If I have an interest only fixed rate loan and make a manual payment into it, will my next interest payment factor in this manual payment?

    Ie. Say in month one my IO payment is approx $800
    In month four I make a manual payment of $500. Will my next IO payment be approx $300 or approx $800?

    • Staff
      BelindaMay 20, 2015Staff

      Hi Claire,

      Thanks for your enquiry.

      As finder.com.au is an online comparison service, we cannot comment on the value of your interest-only payments.

      It would be best to contact your lender directly.

      Thanks,
      Belinda

  9. Default Gravatar
    sandyFebruary 15, 2015

    looking for an int only off set loan a/c, refinance amount 310000

    Reply

    • Staff
      MarcFebruary 16, 2015Staff

      Hi Sandy,
      thanks for the question.

      We’ve compiled some interest only home loans with offset accounts on this page, so it might be a good idea to compare the loans on this page and contact a lender directly to find out more about a loan or to start an application.

      I hope this helps,
      Marc.

  10. Default Gravatar
    sandyFebruary 15, 2015

    looking for an int only off set loan a/c, refinance amount 310000

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