How to Make Sure You Can Pay Back Your Interest Only Home Loan

The truth is that interest only home loans are one of the riskiest loans in the market. But they are chosen by a lot of people because of the small interest only payment for every month. If you go for such a mortgage, you must have the precise plan for its repayments.

If you are looking for finding the right strategy for yourself, you should know how interest only home loans work very well. In the process of the loan, interest payments are only made by you which is very similar to the interest and principal payments for traditional mortgages. You will have to pay the principal amount in full at the end of the term. This is where it gets challenging.

Saving and investing

When you pay only interest on your mortgage we can save a lot of money during the term which makes you able to save enough money for making the principal payment in the end. One of the problems with this the strategy is that the interest rates on home loans are higher than the interest rates on saving accounts and deposits.

Switching to a standard repayment loan

Keeping paying only interest while you have a limited means is one of the strategies used by a lot of borrowers. A standard mortgage repayment plan enables you to pay your portion of the principal back every month and you can switch to that once your income increases. As long as you are certain that you have enough deposit income for making higher payments, this is a very good strategy to follow. Also, you have to make sure that you are a disciplined borrower to make sure that you will qualify.


In order to pay the principal, you can take out another mortgage at the end of the term of the first one. You are able to do this at anytime and any point of the loan too. If you are able to secure a lower interest rate on the new loan, this strategy can be extremely useful. But one thing to remember is that you should be aware of the risks you are taking by using this tactic. You might get rejected for a new loan. But if you get approved, accepting less favorable repayment terms might be forced to you.

Finally, planning the repayment of the interest only home loan is very important and you should plan it very well.

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