Home Loans Interest Only

Table of Content

• The Interest Only Mortgage Calculator
• Best Floating/Variable Home Loans
• Pros of interest-only home loans
• Lender fees are largely irrelevant - the lowest interest rate home loan will be, like for like, the best value
• How to compare interest-only mortgages
• Hearland Home Loans 2 Year Fixed
• Work out how much you could borrow

While we are independent, we may receive compensation from our partners for featured placement of their products or services. Persistently high inflation could see back-to-back increases to the cash rate, according to a new Finder poll. Lenders are still careful when assessing interest-only borrowers.

For new build homes, see how we can help you go from blueprint to build. Take out a new ANZ Home Loan of $100,000 or more and you could get a cash contribution of 1%, up to a maximum of $20,000. New home loans must be approved and documented by 31 March 2023, and the cash contribution is conditional on keeping your home loan with ANZ for at least three years. Scott and Liz can walk away from the house and have it repossessed by the bank, but they will lose their $200,000 deposit and $50,000 bathroom improvements. Later, Auckland's house market slumps and the house is now worth $825,000.

The Interest Only Mortgage Calculator

Because you’re not repaying principal, you can free up cash for other purposes, such as renovations. But remember you pay interest on the full amount you borrowed until an agreed time because you are not paying off any principal in the mortgage you have — then you still have to repay the loan amount . Interest only loans keep your repayments as low as possible.

Some mortgages, which includes interest only mortgages have penalties when a borrower prepays. If the loan is refinanced during the repayment penalty period, the borrower may end up owing additional fees. It is important to check with the lender to see if such a penalty may apply. Remember, if you are negotiating a repayment plan, make sure you can actually afford the proposed terms. It is pointless to agree to a monthly repayment amount if you can't afford it. In all cases, facing up to a problem right away helps find a solution before bigger problems arise.

Best Floating/Variable Home Loans

But while you aren’t paying down debt, at least not immediately, the investor is relying on the premise the property is going to increase in capital gain. This historically has always been true over the long term. If worst comes to worst you can always sell your investment property to pay back the mortgage, but you may not want to sell your main home if you get into a tricky financial situation.

Know that the home will need to be sold within a short time period. Check out the "understanding key mortgage terms" under our NZ Mortgage Calculator. You’ll get an ANZ Home Loan Coach to support you through the buying process. Plus, we have a range of helpful tools available to you throughout your home buying journey. Whatever your situation may be, we can help put a solution together to help you pay off your home loan faster and pay less interest.

Pros of interest-only home loans

With an interest-only mortgage, you don’t repay the money you’ve borrowed at first. Instead, you pay off the interest on top, which makes your repayments much smaller. However, eventually, you have to repay the mortgage in full, and your payments get larger.

42% of new lending to investors was interest-only in the year to April 2022. That compares to 21% for owner-occupiers and first home buyers, according to the Reserve Bank. Yes, interest-only mortgages are still available in New Zealand, depending on which bank you talk to. Each bank has different policies, so it is best to talk to a mortgage broker when negotiating your loan. Here at Opes Partners we generally recommend that investors use interest-only loans for as long as possible, in some cases up to 20 years and beyond.

The response is that they all do interest-only to at least some extent and mostly on similar terms and conditions. Westpac's previous 15 year limit very much made it the 'market leader' in terms of length of interest-only. Now that title goes to the biggest bank, ANZ, with 10 years. The BNZ says its general maximum is five years, though "under special circumstances, by exception" it might too allow up to 10 years, while ASB says "in general terms" it's maximum is five years. This suggests too that maybe if you ask nicely you might be able to get it for longer.

We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us.

Loan types.

The loan balance will actually remain unchanged unless the borrower pays extra. With a table loan, your regular payments stay the same, unless your interest rate changes. Initially, payments mostly pay off the interest you owe, but over time, as you start to pay down your loan, more of each payment goes towards paying off the principal. This is the most popular type of home loan because your regular repayments are the same, which can help you to budget. As its name suggests, an interest-only mortgage means your regular weekly, fortnightly or monthly repayments only include the interest charged.

Instead, the investor sticks with interest-only repayments and then sells the property for a higher price. You can claim mortgage interest payments if you own an investment property, but not any principal loan payments. It’s a short-term strategy, but if you’ve lost your job or are dealing with unexpected expenses, interest-only repayments can be a life-saver. In reality, interest-only mortgages have higher interest rates, so you pay slightly more. Plus, it’s also impossible to accurately calculate loan costs over 30 years because interest rates change over time.