What Happens After the Interest-Only Period Ends?

Borrowers may choose to pay interest-only on their loan for a specified period of time, subject to the lender agreeing to this. 

When the interest-only period is due to expire, the monthly loan repayment will revert to principal and interest. When this happens, your monthly repayments will be higher because you are now also paying down the principal amount borrowed. The loan repayment will also be calculated on the term left on the loan (i.e., the total term led the interest only period).  As the remaining term is lower, but the principal amount borrowed remains the same, the recalculated monthly loan repayments will be higher than if you had paid principal and interest loan for the entire period of your loan.

Find out exactly when the interest-only period is due to end and set yourself a reminder several months in advance so that you have sufficient time to review your options once the period ends.  During this time, contact your lender or finance broker to determine whether your current loan remains suitable available and to consider your other options.

The options available when the interest-only period expires include:

1. Extend your interest-only period

If you do not wish to revert to principal and interest repayments, you can request an extension to your interest-only period. This will be subject to lender criteria, and lenders rarely allow an interest-only period on a loan to exceed 10-years.  You will be required to complete another credit assessment as part of this process

2. Refinance

Speak with your finance broker to see whether refinancing your loan with a different lender would lead to a more competitive loan that is more suited to your current needs and circumstances

3. Revert to principal and interest repayments

With this option, you won’t need to do anything. Your home loan will revert to principal and interest for the remainder of the loan term and your increased loan repayments will automatically be debited from your nominated account.

Contact to Launch Finance and we’ll help you decide the best option for you. Our broad range of lenders and product choice makes Launch Finance a market leading option.

We provide high quality advice and detailed analysis.  Our experienced brokers at Launch Finance can make the process simple and hassle free, providing you with peace of mind knowing that your finances are in the right hands. Contact us today on (08) 9367 4222 or fill in the form on this page!

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