Principal & Interest (“P&I”) / Interest Only (“IO”)

Principal & Interest (“P&I”) / Interest Only (“IO”)

The most common loan type is principal and interest where your repayments are applied to pay interest and also to pay off the loan principal over the loan’s life.

It is also possible to obtain an interest only loan, which have lower repayment requirements because you only have to pay the interest. With an Interest Only loan, the loan balance does not get “paid off”.

Most lenders will apply special conditions to IO loans, such as a restriction on the term of up to 5 years and restricting availability only to finance investment properties.

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