Interest-only loans
Your regular payments are interest only until an agreed time – then you repay the whole loan or you could request to switch to a table loan.
An interest-only mortgage can be ideal when you need a home loan, but don't want to pay off the principal (the original amount you borrowed) just yet. They're often used for property investment. Some people take an interest-only loan for a year or two and then switch to a table loan.
Here's how it works
With this type of mortgage, you don't repay any of the money you've borrowed (principal) until an agreed time – then you repay it all in one sum or you could request to switch to a table loan. In the meantime you make regular interest payments every week, fortnight or month.
For and against
For: Because you're not repaying principal, you can free up cash for other purposes, such as renovations.
Against: You pay interest on the full amount you borrowed until an agreed time because you are not paying off any principal – then you still have to repay the loan amount (or you might for example request to switch to a table loan).
