Benefits of switching to an interest-only loan
Switching to this loan can provide immediate and ongoing advantages, such as:
Lower your monthly repayments
Increase your cash flow
Provide financial relief
What happens during the interest-only period?
During the interest-only period, you won’t be paying down the principal. Once the interest only period ends, your monthly repayments will increase as you repay both the principal and interest over a shorter time frame.
How can an interest-only loan affect your financial future?
Before switching to an interest-only loan, consider these factors:
- The total interest paid may be higher as the principal remains unchanged during the loan term.
- Your loan repayments will increase after the interest-only period ends.
- You're not generating equity in your property. This can impact your financial flexibility and ability to access equity for future needs.
- Interest-only loans can only have a monthly repayment schedule.
When should you consider an interest-only loan?
There are a number of benefits that come from making a switch to an interest-only loan. You may consider this if you:
Want to improve cash flow
Want financial relief
Want to direct additional funds to other investments while making lower repayments
Let’s get started
Call or email Client Services to initiate your request. RedZed’s credit team will review it to ensure everything is in order. Next, all parties will need to sign a variation letter (you’ll receive this via DocuSign). Once this is all completed, we’ll handle the rest and keep you updated!
Don’t stop now, there’s more!
You’ve started strong, keep the momentum going with more handy tips and insights below.
What factors determine the amount of interest you pay?
Learn about interest - what it is, how it's calculated, and the different ways you can reduce your daily interest charges.
What is a redraw facility?
A redraw facility is a feature available with certain loan products that houses any additional repayments you make on your loan, above the minimum required amount.
What is an offset sub-account?
An offset sub-account is a separate account linked to your home loan, where extra repayments help reduce the interest you pay by offsetting your loan balance.