Interest-only home loans

Compare interest-only mortgages for investors and home buyers and read more about how these home loans work.

An interest-only loan can maximise your investment returns and reduce your repayments in the short term.

UBank UHomeLoan Variable Rate

UBank UHomeLoan Variable Rate - Real Reward Offer (Owner Occupier Interest Only)

4.13 % p.a.

variable rate

4.13 % p.a.

comparison rate

UBank UHomeLoan Variable Rate

A competitive interest-only rate with no application fee and ongoing fee.

  • Interest rate of 4.13% p.a.
  • Comparison rate of 4.13% p.a.
  • Application fee of $0
  • Maximum LVR: 80%
  • Minimum borrowing: $100,000
  • Max borrowing: $2,000,000
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Use the table below to start comparing interest-only home loans

Rates last updated September 22nd, 2018
$
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
4.13%
4.13%
$0
$0 p.a.
80%
This is a competitive interest-only rate product that's also low in fees.
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
4.04%
3.93%
$0
$0 p.a.
80%
Fix your rate for 1 year and make interest-only payments.
3.93%
3.94%
$0
$0 p.a.
80%
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.14%
3.96%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
3.89%
3.94%
$0
$0 p.a.
80%
Pay no application or ongoing fee and borrow up to 80% LVR.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
4.31%
3.95%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.74%
4.75%
$600
$0 p.a.
90%
A low-fee interest-only loan for investment. You can get this loan with a 10% deposit.
4.18%
4.19%
$0
$0 p.a.
80%
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
3.99%
4.44%
$395
$0 p.a.
80%
Pay no ongoing fees on this investment loan fixed for 3 years.
4.24%
4.00%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.73%
4.41%
$0
$0 p.a.
90%
A basic package loan with a competitive rate and no ongoing fees.
4.90%
4.31%
$0
$0 p.a.
80%
Lock in a fixed rate for 5 years and make interest-only payments with this investment loan.

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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.

How can I get an interest-only home loan?

Banks can be slightly warier of interest-only borrowers, but 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?

Many investors use interest-only loans 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. The risk with this strategy is that if property prices fall you can end up in 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.
  • 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.

Learn more about the pros and cons of interest-only loans

Interest only infographic

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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Home Loan Offers

Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150k+ Owner Occupier, P&I) Discount 1

New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.

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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

    • finder Customer Care
      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

    • finder Customer Care
      LouMay 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?

    • finder Customer Care
      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?

    • Default Gravatar
      JodieJune 15, 2015

      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

    • finder Customer Care
      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.

    • Default Gravatar
      JodieMay 12, 2015

      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?

    • finder Customer Care
      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

    • finder Customer Care
      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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