Interest-Only Home Loan Risks: What You Need to Know
All mortgages carry risks. The average mortgage amount in Australia has reached almost $600,000. Over 30 years and at an interest rate of 3%, this nets a monthly repayment of $2,529. When you opt for an interest-only home loan, the same terms net repayment of $1,500. That’s a significant difference. For many homebuyers, paying $1,000 less every month affords them a financial boost for the first five to 10 years.
Keep in mind that the lower monthly repayments do not last for 30 years. When the interest-only period expires, the repayments will jump. That’s one of the interest-only home loan risks that homeowners face.
In addition, the property does not accrue home equity during the interest-only period. Since the repayments only cover the interest charges, the principal amount does not drop.
Again, an interest-only mortgage helps homebuyers become homeowners. Before the interest-only period expires, homeowners must speak with their lender. Mortgage House works with homeowners who want to refinance or obtain a different home loan. Simply speak with our loan specialists to get the ball rolling. Then, they can guide homeowners on the next steps.
To see how your potential interest-only mortgage shifts based on the interest rate and amount borrowed, try our Mortgage House mortgage repayment calculator online.
Interest-Only Home Loan Risks Conclusion
The interest-only home loan risks remain significant. Homeowners who remain diligent can reap the rewards of this mortgage and avoid the risks associated with it. To find out more, contact our loan specialists at Mortgage House today.