Interest only Home Loan
Most home loans are principal-and-interest loans, which means that your regular payments will reduce the principal (amount borrowed) as well as paying off the interest. An interest-only mortgage is a home loan where only the interest is paid, rather than both the interest and the principle, and accounts for about 20% of mortgages in Australia.
This type of loan is popular for investors who are able to claim the interest they pay on the loan as a tax deduction, or buyers who only plan on holding onto a property for a few years before selling it. Interest-only home loans can be tempting to home buyers as the repayments are generally lower when no principle is included in the repayment, the major downside with these interest only home loans is that in the long term you may end up paying significantly more interest on your loan. As you are only repaying the interest on the loan the monthly repayments on interest only home loans will be lower than those of a standard home loan, though these lower repayments mean that you are not actually repaying any of the debt. Consequently at the end of the mortgage term you will still owe the lender the same amount that you originally borrowed.