Interest only repayments

Interest only (IO) terms of 1 to 5 years are available to both new and existing clients, subject to credit approval. 
 

Considerations for IO home loans

If your client requires an IO repayment period, you must explain the following to them:

• the maximum IO period is 5 years
• the loan must have at least 20 years remaining at the end of the IO term
• IO loans may attract a higher interest rate compared to principal and interest (P&I) loans
• IO loan repayments will not pay off any principal during the IO term, therefore the amount of equity that can be built-up in the home will be less with an IO loan than with a P&I loan.
• the repayments required to pay out the loan will increase after the IO period ends to cover both principal and interest
• the applicant(s) will pay more interest over the life of their loan than if there was no IO term
• our Personal Help Centre provides additional information on how interest only repayments are calculated.  

In the Loans tab of ApplyOnline, a written explanation outlining your client’s decision for choosing IO repayments is required and must be consistent with their loan purpose and needs.

For example, your client may be choosing IO repayments:

• to accommodate a temporary reduction in income, such as for an acceptable period of leave from work
• to create funds for investment purposes
• for taxation, financial or accounting reasons.

For existing clients, if you wish to apply for a conversion or extension of an existing IO period, they’ll need to undergo a credit assessment.

Our Variations team can help you with this application. See Convert or extend an interest only period for more information.