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Interest only repayments
When it comes to home loan repayments, you may have the option to choose principal and interest or interest only repayments. Get to know more about interest only repayments so you can decide whether it is the suitable option for you.
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Interest ratedisclaimer disclaimer | Comparison ratedisclaimer |
Comparison rate calculated on a loan amount of $150,000 over a term of 25 years based on monthly payments, including any applicable interest rate discounts. These rates are for secured loans only.
Warning: This Comparison Rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Home loan repayments consist of two parts:
1. The principal component: the amount you're borrowing
2. The interest component: the amount your lender charges on your outstanding principal component
Understanding how these different types of loan repayments work, and how they can change over time is important before deciding on a repayment type.
Principal and interest repayments
- This means you will be paying down your principal component (as well as the interest it accrues) from your first repayment
- You could pay less interest over the life of the loan as your principal component will be reduced by each repayment
- Generally have lower interest rates compared to interest only repayments, however, as interest rates can change, it's important to check the current interest rates on loan products before making a loan application or accepting a loan offered by ANZ
Interest only repayments
- This means you’re only paying down the interest charges to your loan for an agreed period of time
- You will also be paying more interest over the life of the loan, as you're not paying the principal component of the loan on which interest continues to be calculated during the interest only period
- Higher interest rates generally apply during the interest only period
- Your minimum repayments will be lower during the interest only period as compared to paying principal and interest, as you're not paying off the principal component. Interest only periods are only available for certain specific periods according to product type.disclaimerAt the end of the interest only period, minimum repayment amounts may increase to cover principal and interest.
The information on this page does not apply to ANZ Plus products
Property investors
Interest only payments may better suit some customers' investment objectives, taking into account their particular tax and investment arrangements, including the potential to maximise tax deductions.disclaimer
Free up funds for other purposes
Your repayments will likely be reduced during the interest only period as compared to paying principal and interest repayments. This may enable you to utilise any money you save during the interest only period to fund renovations, repairs or maintenance on your home or rental property.
Reduced home loan repayments during interest only period
Reduce your repayment amounts for a period of time by only covering the interest charges on your loan. Once your interest only period ends, your repayments will be higher than they otherwise would have been had you been paying principal and interest repayments.
Help managing life's unexpected events
Temporarily reducing your home loan repayments could help ease some financial pressure when life's unexpected events happen, like injury, illness, redundancy or separation.
The table shows the difference in repayments when utilising principal and interest repayments as compared to interest only repayments. This is a hypothetical example used for illustrative purposes only.
The calculations below are based on an interest rate of 5% per annum for principal and interest, and 5.55% per annum for interest only. These are just example rates and the calculations for a particular customer will change depending on the actual interest rate for their home loan.
Rates may change from time to time. Find out more about ANZ’s current home loan interest rates.
At the end of your interest only period, you’ll need to start paying off the principal component at the interest rate that applies at that time, which is likely to result in higher repayments.
Principal and interest for the life of the loan |
Interest only for the first 5 years of the loan |
|
|---|---|---|
Interest rate |
5.00% |
5.55% |
Loan Size |
$500,000 |
$500,000 |
Loan Term |
30 years |
30 years |
Monthly repayments from year 1-5 |
$2,684.11 |
$2,312.50 $372 lower in repayments |
Monthly repayment from year 6-30 |
$2,684.11 |
$2,922.95 $238.86 higher in monthly repayments as compared to having paid principal and interest repayments for the life of the loan |
Additional interest paid over the life of the loan due to the 5 years interest only period |
$0 Applicable to |
$49,356 |
Loan balance at year 6 |
$338,000 |
$500,000 |
As you can see in this example, for the first 5 years during the interest only period, your repayments might be lower. But from year 6, after the interest only period ends and your repayments switch to principal and interest, your monthly repayments increase. Also, the total amount of interest you pay over the life of the loan will be higher compared to a loan with principal and interest repayments.
The above example is for illustrative purposes only, is based on constant interest rates over the life of the loan and assumes that all required payments are made. Actual interest rates may vary, and fees and charges may apply, impacting the repayment amount. The example doesn't take into account the impact of redraw or offset on loan repayments.
How to apply for interest only repayments
An interest only period is available for Owner Occupied and Investment home loans.
Owner occupied
1, 2, 3, 4, 5 years
Investment loan
1-5, 7 & 10 years
- To switch to an interest only home loan, an eligibility assessment will be required for new and extension requests by your lender or broker.
- You may be required to fill out a Statement of Position form which will provide us with evidence of your current income, liabilities and expenses.disclaimer
Request a call back to speak to one of our home loan specialists if you would like to apply to switch to interest only repayments.
When the interest only period expires, your repayments will change to principal and interest. This usually means your repayment amount will increase as you will now be repaying principal as well as paying interest on your loan.
We’ll remind you a few months before the interest only period expires to help you prepare for the new repayment. In certain circumstances, it may be possible to extend your interest only period.
Apply to extend your interest only period
To extend your interest only period you’ll need to contact us to make an application. This will require updated information such as your current income and expenditure. Following an assessment of your application, you’ll be advised if ANZ agrees to extend your interest only period.
To complete this process may take up to four weeks so, if you would like to extend your interest only period, please allow sufficient time before your interest only period expires. Total maximum interest only periods apply as the principal component must be repaid during the loan term.
Reached your interest only expiry date?
Are you about to reach your Interest only expiry date, but don’t want to switch to principal and interest? It may be possible to extend your interest only period, speak to an ANZ lender today to find out more about our options.
We're here to help
Our home loan specialists can help you make changes to your home loan, a pre-approval,disclaimer a new home loan, refinancing or topping up your existing home loan.
You can also chat to an ANZ accredited broker for help with your home buying, investing or refinancing needs.
Get support if you need it
We understand financial circumstances can change, and we will do our best to help if you’re having trouble with your home loan repayments. Here’s what to do if you’re worried about meeting your home loan repayments.
Applications for credit are subject to ANZ’s credit approval criteria. Terms and conditions, and fees and charges apply. Australian credit licence number 234527.
Any advice does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. ANZ recommends you read the Terms and Conditions and Product Disclosure Statement, which are available at anz.com or by calling 13 13 14, before deciding whether to acquire, or continue to hold, the product.
The information on this page does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you and read the relevant terms and conditions, Product Disclosure Statement and the ANZ Financial Services Guide (PDF) before acquiring any product.
Applications for credit subject to approval. Terms and conditions available on application. Fees and charges apply. Australian credit licence number 234527.
The ANZ App is provided by Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. Super and Insurance (if available) are not provided by ANZ but entities which are not banks. ANZ does not guarantee them. This information is general in nature only and does not take into account your personal objectives, financial situation or needs. ANZ recommends that you read the ANZ App Terms and Conditions available here for iOS (PDF) and here for Android (PDF) and consider if this service is appropriate to you prior to making a decision to acquire or use the ANZ App.
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The rate shown is the Simplicity PLUS Residential Investment Property Loan index less the applicable special offer discount. Rates are subject to change. Eligibility criteria apply to special offer discounts, including $50,000 or more in new or additional ANZ lending. Offers can be withdrawn or changed anytime.
ReturnRates shown apply during the fixed period of your loan. After the fixed period, your rate will switch to the applicable variable rate for a principal and interest loan.
ReturnInterest rates shown on this page are current as at and are subject to change. For all applicable fees & charges please see the ANZ Personal Banking Account Fees and Charges (PDF), ANZ Personal Banking General Fees and Charges (PDF) and your letter of offer.
ReturnComparison rate calculated on a loan amount of $150,000 over a term of 25 years based on monthly payments, including any applicable interest rate discounts. These rates are for secured loans only.
WARNING: This Comparison Rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
For interest only variable loans, the comparison rates are based on an initial 5 year interest only term. For fixed rate interest only loans, the comparison rates are based on an initial interest only period equal in term to the fixed period.
ReturnRates shown apply during the interest only period of your loan. Choose from 1-5 year interest only terms for owner occupied on an ANZ Standard Variable (Land Loan up to three years) and ANZ Fixed (Land Loan up to three years) and choose from 1-5, 7 and 10 year interest only terms for residential investments on an ANZ Standard Variable (Land Loan up to one year), ANZ Fixed (Land Loan up to one year) and ANZ Simplicity PLUS. If you choose to make interest only payments on ANZ Fixed, your fixed period and interest only period will be the same. After the interest only period, your rate will switch to the applicable variable rate for a principal and interest loan. At the end of the interest only period, minimum repayment amounts may increase to cover principal and interest. Interest only loans are not for everyone and you should consider if this is the right strategy for you.
ReturnThis is general information only and does not constitute tax advice. We recommend you obtain independent advice from a financial planner and/or registered tax agent if you are considering the right repayment type for you or purchasing an investment property.
ReturnApplications for credit are subject to ANZ’s credit approval criteria. Terms and conditions, and fees and charges apply. Australian credit licence number 234527.
ReturnANZ may provide pre-approval (also known as approval in principle or conditional approval) to eligible customers who apply for an ANZ home loan and complete an application form and satisfy any other applicable requirements. Pre-approval is an approval for a loan subject to conditions being met, including that security is satisfactory to ANZ. Australian Credit Licence Number 234527.
ReturnANZ Mobile Lenders operate as an independently operated ANZ Mortgage Solutions franchise of Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. Australian Credit Licence Number 234527.
Return