Are you ready to change your mortgage from Interest Only to Principle and Interest?
We can assist you when you decide it is time to change your mortgage from an Interest Only mortgage to a Principle and Interest mortgage.
Why would you change from an Interest Only to a Principal and Interest mortgage?
Most home loan mortgages are ‘Principal and Interest’ loans, which means your monthly repayments reduce both the principal (amount borrowed) and the interest accrued for that period.
For an Interest Only loan, you only pay the interest on the amount outstanding for that period. These Interest Only loans are usually set for a period, e.g, 5 years, after which the loan changes to a Principal and Interest loan. Interest rates on Interest Only loans are often higher than for standard Principal and Interest loans.
Previously the most common reason to change from Interest Only to Principal and Interest was that the Interest Only period had come to an end.
This trend is changing as major lenders reduce their Principal and Interest rates, making it financially sensible to convert their loans to Principal and Interest earlier than was planned. Refer the recent news article below:
NOTE: Due to regulatory changes the days of relatively low Interest Only lending rates are disappearing. Investors are likely to get a better rate now if they change out of their Interest Only loan and move across to Principal and Interest.
The great positive about this approach is that you would start paying off the principal of your mortgage and thus commence building up equity in your property, which can only be a good thing.
What to consider when changing from an Interest Only to a Principal and Interest mortgage
There could be exit and other fees involved when refinancing your current loan. We can help you decide if the change is beneficial for you given your circumstances.
We have access to more than 20 Australian lenders and an experienced team to help you decide. Click Here for our mortgage options