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