Switching your loan repayments to interest-only is another option
If your income has taken a hit due to the coronavirus crisis, you might be thinking of switching your home loan to interest-only. This would have pros and cons.
The main benefit of switching from principal-and-interest to interest-only repayments is that your repayments would be lower during the interest-only period.
However, switching to interest-only would also have drawbacks:
- You wouldn’t reduce your outstanding debt during the interest-only period
- You would pay more in interest over the life of the loan (although this might deliver tax benefits if you were an investor)
- You might not be prepared to revert to higher repayments once the interest-only period ended
- A switch to Interest Only is not as simple as a phone chat and will usually require a mini-assessment of your circumstances
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