See the top interest-only home loan offers, with rates starting from 5.74% (comparison rate^ 6.89%)
Find your best deal
In our interest-only home loans guide:
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Arab Bank Australia - The Basics Home Loan Variable | |
---|---|
Variable interest rate | 5.75% p.a. variable (special offer) - discount of 3.54% over the life of the loan |
Comparison rate^ | 5.88% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 60% |
Arab Bank Australia - The Essentials Low Rate Home Loan | |
Variable interest rate | 5.90% p.a. variable (special offer) - discount of 3.49% off the standard variable rate |
Comparison rate^ | 5.94% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 60% |
The Mac Credit Union - Owner Occupied Variable | |
Variable interest rate | 5.92% p.a. variable (2-year intro rate) |
Comparison rate^ | 7.57% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 95% |
Greater Bank - Great Rate Home Loan | |
Variable interest rate | 5.94% p.a. variable (special offer) |
Comparison rate^ | 5.95% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
The Capricornian - Offset Owner Occupied Variable | |
Variable interest rate | 5.99% p.a. variable |
Comparison rate^ | 5.99% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 97% |
Queensland Country Bank - Special Variable Package Rate | |
Variable interest rate | 5.99% p.a. variable |
Comparison rate^ | 6.33%p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Unity Bank - First Home Buyer Advantage Plus Home Loan | |
Variable interest rate | 5.99% p.a. variable |
Comparison rate^ | 6.76%p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
IMB - Budget Home Loan | |
Variable interest rate | 6.14% p.a. variable |
Comparison rate^ | 6.17% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Great Southern Bank - Basic Construction Owner Occupied | |
Variable interest rate | 6.14% p.a. variable |
Comparison rate^ | 6.20% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 70% |
Pacific Mortgage Group - Owner Occupied Variable | |
Variable interest rate | 6.19% p.a. variable |
Comparison rate^ | 6.19% p.a. variable |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Variable interest rate | Comparison rate^ | Features | Maximum loan-to-value ratio (LVR) | |
---|---|---|---|---|
Arab Bank Australia - The Basics Home Loan Variable | 5.75% p.a. variable (special offer) - discount of 3.54% over the life of the loan | 5.88% p.a. |
| 60% |
Arab Bank Australia - The Essentials Low Rate Home Loan | 5.90% p.a. variable (special offer) - discount of 3.49% off the standard variable rate | 5.94% p.a. |
| 60% |
The Mac Credit Union - Owner Occupied Variable | 5.92% p.a. variable (2-year intro rate) | 7.57% p.a. |
| 95% |
Greater Bank - Great Rate Home Loan | 5.94% p.a. variable (special offer) | 5.95% p.a. |
| 80% |
The Capricornian - Offset Owner Occupied Variable | 5.99% p.a. variable | 5.99% p.a. |
| 97% |
Queensland Country Bank - Special Variable Package Rate | 5.99% p.a. variable | 6.33%p.a. |
| 80% |
Unity Bank - First Home Buyer Advantage Plus Home Loan | 5.99% p.a. variable | 6.76%p.a. |
| 80% |
IMB - Budget Home Loan | 6.14% p.a. variable | 6.17% p.a. |
| 80% |
Great Southern Bank - Basic Construction Owner Occupied | 6.14% p.a. variable | 6.20% p.a. |
| 70% |
Pacific Mortgage Group - Owner Occupied Variable | 6.19% p.a. variable | 6.19% p.a. variable |
| 80% |
Unity Bank - First Home Buyer Advantage Plus Home Loan | |
---|---|
Interest rate | 5.74% p.a, fixed for 3 years |
Comparison rate^ | 6.89% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 95% |
MOVE Bank - Everyday Home Loan Fixed (Investment Loans Only) | |
Interest rate | 5.79% p.a., fixed for 3 years |
Comparison rate^ | 5.95% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 95% |
Queensland Country Bank - Fixed Rate Package Home Loan | |
Interest rate | 5.89% p.a., fixed for 3 years |
Comparison rate^ | 6.47% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Regional Australia Bank - Home Loan Fixed | |
Interest rate | 5.91% p.a., fixed for 3 years |
Comparison rate^ | 5.98% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 60% |
Greater Bank - Great Rate Home Loan Fixed | |
Interest rate | 5.94% p.a., fixed for 5 years |
Comparison rate^ | 7.02% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Greater Bank - Ultimate Home Loan Fixed | |
Interest rate | 5.94% p.a., fixed for 4 years |
Comparison rate^ | 7.15% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Greater Bank - Ultimate Home Loan Fixed | |
Interest rate | 5.94% p.a., fixed for 3 years |
Comparison rate^ | 7.31% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Regional Australia Bank - Home Loan Fixed | |
Interest rate | 5.96% p.a., fixed for 3 years |
Comparison rate^ | 6.01% p.a |
Features |
|
Maximum loan-to-value ratio (LVR) | 60-70% |
The Mutual Bank - Package Home Loan Premium | |
Interest rate | 6.19% p.a., fixed for 3 years |
Comparison rate^ | 7.60% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 95% |
The Mutual Bank - Package Home Loan Premium | |
Interest rate | 6.19% p.a., fixed for 2 years |
Comparison rate^ | 7.73% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 95% |
G&C Mutual Bank - Owner Occupied Fixed | |
Interest rate | 6.25% p.a., fixed for 1-3 years |
Comparison rate^ | 6.30% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 95% |
Qudos Bank - Owner Occupied Fixed | |
Interest rate | 6.34% p.a., fixed for 3 years |
Comparison rate^ | 6.34% p.a. |
Features |
|
Maximum loan-to-value ratio (LVR) | 80% |
Interest rate | Comparison rate^ | Features | Maximum loan-to-value ratio (LVR) | |
---|---|---|---|---|
Unity Bank - First Home Buyer Advantage Plus Home Loan | 5.74% p.a, fixed for 3 years | 6.89% p.a. |
| 95% |
MOVE Bank - Everyday Home Loan Fixed (Investment Loans Only) | 5.79% p.a., fixed for 3 years | 5.95% p.a. |
| 95% |
Queensland Country Bank - Fixed Rate Package Home Loan | 5.89% p.a., fixed for 3 years | 6.47% p.a. |
| 80% |
Regional Australia Bank - Home Loan Fixed | 5.91% p.a., fixed for 3 years | 5.98% p.a. |
| 60% |
Greater Bank - Great Rate Home Loan Fixed | 5.94% p.a., fixed for 5 years | 7.02% p.a. |
| 80% |
Greater Bank - Ultimate Home Loan Fixed | 5.94% p.a., fixed for 4 years | 7.15% p.a. |
| 80% |
Greater Bank - Ultimate Home Loan Fixed | 5.94% p.a., fixed for 3 years | 7.31% p.a. |
| 80% |
Regional Australia Bank - Home Loan Fixed | 5.96% p.a., fixed for 3 years | 6.01% p.a |
| 60-70% |
The Mutual Bank - Package Home Loan Premium | 6.19% p.a., fixed for 3 years | 7.60% p.a. |
| 95% |
The Mutual Bank - Package Home Loan Premium | 6.19% p.a., fixed for 2 years | 7.73% p.a. |
| 95% |
G&C Mutual Bank - Owner Occupied Fixed | 6.25% p.a., fixed for 1-3 years | 6.30% p.a. |
| 95% |
Qudos Bank - Owner Occupied Fixed | 6.34% p.a., fixed for 3 years | 6.34% p.a. |
| 80% |
With an interest-only home loan your repayments only go towards paying off the interest charged by the lender on your loan for a set period. You won’t be paying off the home loan itself (the principal) during the interest-only period.
Because of this, repayments on an interest-only home loan will generally be lower than repayments on a comparable principal and interest home loan.
Here are the key aspects to how interest-only home loans work:
“If you’re considering an interest-only home loan, you need to know what your plan is for transitioning to principal and interest repayments so you're actually paying down the debt. Depending on your age, staying on interest-only for a long time could mean you still have a big home loan debt as you approach retirement.”
Mansour Soltani, Money.com.au's home loan expert
Principal & interest home loan | Interest-only home loan (1-year) | Interest-only home loan (5-year) | |
---|---|---|---|
Loan term | 30 | 30 | 30 |
Loan amount | $600,000 | $600,000 | $600,000 |
Interest rate | 6% | 6% | 6% |
Monthly repayment during interest-only period | $3,597 | $3,000 | $3,000 |
Monthly repayment after interest-only period | $3,597 | $3,642 | $3,866 |
Total interest cost over the life of the loan | $695,029 | $703,426 | $739,743 |
Extra interest paid over the life of the loan | n/a | $8,397 | $44,714 |
During construction of a new home when costs are high borrowers may benefit from lower repayments until construction is complete.
If you buy a new home before you sell your current one, lower interest-only repayments may temporarily ease the financial burden and impact of property costs.
Some investors choose interest-only repayments on their investment property home loan to minimise initial costs and free up cash to invest elsewhere. Interest may be a tax-deductible expense for some investors, so paying more interest overall on a loan may be less of a concern.
If your circumstances change and your household’s income decreases (for example, after the birth of a child) interest-only repayments can provide temporary relief.
If you have other debt with higher interest rates than your home loan, such as credit cards or personal loans, switching to lower interest-only repayments on your home loan can temporarily free up money to repay that debt.
Lower initial repayments
Free up cash to use elsewhere
Choose your interest-only duration
Available from most lenders
Higher repayments after the interest-only term
Higher interest rates apply
More interest to pay overall
You don’t build equity in your property
One of the biggest risks with interest-only loans is the increase in repayments when the loan reverts to principal and interest at the end of the interest-only period.
In some cases, the repayment amount will increase significantly, which can cause significant financial strain if you’re not prepared for it.
To get ready for your repayment amount to increase after your interest-only period ends you can:
Getting approved for an interest-only loan can be more difficult than it is for a principal and interest loan. That’s because interest-only loans are generally considered to be riskier by lenders.
To make your application as strong as possible you can:
An interest-only home loan is a loan that only requires you to make interest payments for a fixed period of time. When that period ends, your repayments will revert to principal and interest.
In some cases, interest-only repayments may be suitable for a property investment home loan. The idea is to minimise property costs (i.e. interest on the investment loan) and to use that money for other investments. There are risks to this strategy, however, and it generally relies on the property increasing in value during the interest-only period.
Investors should always talk to an expert for advice before opting for an interest-only home loan, as they can be risky and very expensive if things don’t work out.
All of the big four banks (ANZ, NAB, Commbank & Westpac) and most other lenders offer interest-only home loans. That includes non-bank lenders, credit unions, plus non-bank lenders offering low doc and bad credit home loans. You can get an interest-only home loan directly from a lender or through a mortgage broker.
Interest-only home loans tend to come with higher interest rates compared to principal and interest home loans. And while your loan will cost you less in repayments during the interest-only period, you typically pay more interest overall with an interest-only home loan.
To apply for an interest-only home loan you will usually need a deposit of at least 5% of the property value. Put another way, the minimum loan-to-value ratio is typically 95%.
However, unless you have a deposit of at least 20%, you may need to pay for lender’s mortgage insurance.
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