What is an interest only home loan?

An interest only home loan requires you to only repay the monthly interest on the amount borrowed (the principal) for a set term of 1-5 years. No repayments are required to reduce the principal amount borrowed, which means the loan balance doesn't reduce at all. At the end of the interest only period, the loan will change to a 'principal and interest' loan where you'll start repaying the amount borrowed, as well as interest on that amount. This will mean your loan repayments will be higher than if you had of made principal and interest repayments at the beginning of the loan.

Benefits of interest only home loans

We've listed out a number of reasons why investors choose to take out a BOQ interest only home loan.

Low repayments for the interest only period

By taking out an interest only home loan, your repayments are lower for an initial term before you are required to start paying down the principal loan amount.

Maximise tax benefits

Investors may choose to take an interest only loan in order to maximise their tax deductions. 

More cash flow

With lower repayments for the initial term, you'll have more money on hand to make improvements to your investment property.

Who are interest only home loans suitable for?

Interest only home loans are a popular choice for property investors who prefer not to pay down the loan at the start but instead use the extra money to make improvements to the property and hopefully increase its value. Making further improvements to the property will hopefully make the home more appealing to renters and increase your rental income.

As always, if you need any guidance in deciding what loan is the right for you, please contact your BOQ home lending specialist on 1300 55 72 72 or find your local branch.

What do I need to know about interest only home loans?

Comparing loans can be like comparing apples with oranges, so it’s important that you consider all the loan features before deciding if it’s the right one for you and your investment goals. 

  • Once the interest only period is over, you will need to make payments on both the principal and interest within the remaining loan term. This will mean your repayments will be much higher than it would be if principal repayments were made at the start of the loan term.
  • The interest rate for an interest only home loan may be higher than the interest rate for principal and interest rate home loan.
  • Interest only terms are also available on fixed rate loans - the interest only term must match the fixed rate term.
  • Our 1 Year Interest Prepaid Investment Home Loan enables investors who have extra funds on hand to 'prepay' the annual interest upfront to maximise their tax deductions.
  • You can have a mortgage offset linked to your home loan if you choose an eligible variable loan like our Clear Path Variable Interest Only Home Loan.
  • For a construction loan, during the construction period you only need to make interest only repayments. 

Our Interest Only Home Loans

Prepay your interest in advance

1 Year Fixed Interest Prepaid Home Loan

A home loan for investors that enables you to prepay the annual interest in advance.

  • Available for investors only
  • 1 year fixed interest rate
  • Annual interest prepaid in advance

Pay off your home loan sooner

Intro Rate Variable Interest Only Home Loan

A discounted low rate home loan with all the great features including:

  • Owner occupier and investor options available
  • Unlimited free redraw and flexible repayments
  • 100% Mortgage offset account

Save with our simple investment home loan

Economy Variable Interest Only Home Loan

A simple home loan doesn't mean you have to compromise on its features.

  • Investment home loan option available
  • Unlimited free redraw
  • Unlimited additional repayments

Got any questions?

Get in touch with your BOQ lending specialist to answer any questions you may have. 

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