Skip to main content Skip to main navigation Skip to accessibility page Skip to search input

Principal and interest or interest only?

Principal & interest
Each payment reduces the amount you’ve borrowed (the principal) as well as the interest and any fees and charges. This means the outstanding balance of the loan will reduce over time.
Interest only
You pay only the interest charged to your loan that month plus any applicable fees and charges. Interest only repayments don’t reduce the outstanding balance.

Interest Rate Types

Variable
Your interest rate could fluctuate either up or down. This can affect your repayments. If the interest rate goes up, your repayments will also increase, if the interest rate falls, your repayments will also go down.
Fixed
Your interest rate is fixed at the time you settle your loan for a term of 1 to 5 years. Fixing your rate means you will know what your repayments will be and they are unaffected by interest rate changes during the fixed period.

Other features

Redraw
Some loans will allow you to access any extra repayments you've made so far.
Offset Facility
The balance in the savings account is offset against the amount owing on the home loan when interest is calculated. This means that savings in your offset account will help you to save money and repay your home loan sooner.
Repayment pause
Some loans allow you to take a break from repayments if you need to. It can be handy, but remember the payments are likely to be higher after the break.