We currently don't have that product, but here are others to consider:
How we picked theseThe average variable interest rate with principal-and-interest repayments is:
6.64%
But the average variable interest rate with interest-only repayments is:
7.06%
This is a difference of 42 basis points.
Source: Finder's database, June 2025
With an interest-only home loan, you choose a fixed term where you only repay the interest charges on your loan. Usually between 1 and 5 years, you won't repay the money you've borrowed.
Your repayments will be lower for that time, but when the loan reverts to principal and interest once the term ends you'll have much higher repayments.
There are 2 parts to any home loan repayment: the principal and the interest.
The principal is the money you borrow from the lender. That's your loan and that needs to be repaid.
Interest is charged by the lender as a percentage of the money you've borrowed. The amount of interest charged depends on the loan's interest rate.
Most borrowers take out principal and interest home loans where they pay both of those at the same time.
With an interest-only home loan, you delay repaying the principal and only pay the interest charges. You will usually be charged a higher interest rate for this type of loan, but because you're not paying the principal as well your monthly repayments will be lower.
Because you're not paying down the loan amount during an interest-only period, you'll continue to accrue interest and will likely pay more over the life of the loan.
Here's a quick example using 2 home loans that are identical except for the repayments.
Both loans are for $600,000 over 30 year loan terms with interest rates of 6%.
| Principal and interest | Interest-only | |
|---|---|---|
| Interest only period | NA | 2 years |
| Monthly repayments | $3,598 | $3,000 during IO period $3,691 after IO period |
| Total loan cost over 30 years | $1,295,030 | $1,312,091 |
| Difference in cost | $17,061 cheaper | $17,061 more expensive |
In the scenarios above, opting for interest-only repayments for 2 years will cost you $17,061 extra in interest.
But this is just a simple hypothetical. In reality, interest-only loans have higher interest rates, so you'd likely pay slightly more.
There are 2 major reasons borrowers choose interest-only home loans even though they cost more in the long run.
While principal-and-interest repayments save you money in the long term, some borrowers might find they need a bit of relief. In this case, interest-only repayments give you some breathing space.
It's a short-term strategy, but if you've lost your job or are dealing with unexpected expenses, interest-only repayments can be a lifesaver.
Interest-only investment loans are popular with property investors. If you own an investment property, you're allowed to claim any mortgage interest payments as tax deductions. That's because you can't claim any payments off the principal (and homeowners can't claim anything).
Let's say you have an investment property loan worth $400,000. The interest-only repayments are $1,500 per month, while principal and interest repayments are $2,500.
You can only claim the interest part of the payment ($1,500), so you might decide to get an interest-only loan to do the following:
Some savvy investors buy a property in a booming market and then hold onto it for just a few years. While the property grows in value, they just pay off the loan interest and use it to reduce their tax bill. They also earn rent, which they might put into an offset account or save elsewhere.
But they never repay the loan. Instead, they stick with interest-only repayments and then sell the property for a higher price.
This doesn't work when property prices aren't growing fast and is obviously a pretty risky investment strategy.
There's nothing wrong with an interest-only loan. You just need to be aware of the potential risks and understand exactly what you're getting yourself into.
Delaying the repayment of money you've borrowed winds up costing you more. By not paying off the loan principal from day one, you get charged more interest over the life of the loan.
Interest-only loans also have higher rates than principal-and-interest loans.
If your property were to remain the same value, you won't build any equity in your home if you're not repaying any of the principal. This means from the day you move into the property, you don't own any more of it than the amount you paid for a deposit.
You could even end up in negative equity if the property loses value.
Imagine you bought an investment property in a small mining town. For 3 years, you made interest-only repayments.
You had trouble renting it out because the town's mine closed. And the property market slowed. Your property has actually lost value and there are no interested buyers.
Then your loan reverted to principal-and-interest repayments.
Now your repayments are much higher, but your property is worth less. You haven't paid off any of your loan. You're in a worse position than when you started. Most borrowers won't find themselves in this situation, but it's important to understand the possible risks.
Here's what you need to do to find the best interest-only home loan for you:
"Although your repayments will reduce for the short term, you will end up with even larger monthly repayments once the interest-only period ends. If you're taking out an interest-only loan because you're struggling with repayments, you need to consider whether you'll be able to afford those larger repayments.
The overall cost of the loan will be much higher, but there is a way you can minimise that.
If you can afford those larger repayments and even a little bit more, by making extra repayments towards your loan you'll cut down the principal even faster. The more you pay down the principal, the less interest you'll pay."
APRA removed its limits on interest-only lending years ago, but lenders are still extra careful when assessing interest-only borrowers.
You can maximise the chances of getting your application approved by doing the following:
Detailed guide to home loan applications
Borrowers with interest-only loans need to pay careful attention to their home loans. To help you stay on top of your mortgage, you should do the following:
The Finder Score crunches 7,000 home loans across 120+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.
To provide a Score, we compare like-for-like loans. So if you're comparing the best home loans for cashback, you can see how each home loan stacks up against other home loans with the same borrower type, rate type and repayment type. We also take into consideration the amount of cashback offered when calculating the Score so you can tell if it's really worth it.
Read the full Finder Score breakdown
Compare interest only loans for investment. Learn how these loans can help investors minimise their non-tax deductible expenses.
If you aren’t paying attention to when your interest-only period ends, you could find yourself facing higher repayments or a shorter loan term.
We are paying 10% on a 250k interest only loan to a private financier on our rural property. We would like a better cheaper option. Pls contact me with a better solution.
Hi Colin,
You can compare lenders listed on this page that offer better rates. It may also be worthwhile consulting a mortgage broker to talk through your specific needs and help match you up to a lender that suits your circumstances.
Kind regards,
Rebecca
Hello Colin,
In a situation like yours, you might need to speak to a local mortgage broker. They can help you find a suitable rural loan if you can’t find anything yourself.
I hope this helps.
Richard
How likely is it that our lender would consider interest only on our mortgage which is 5.4% interest and we are finding it difficult to pay the high repayments and/or reduce the rate to a more reasonable rate? Would a mortgage moratorium be useful to us as we will need some breathing space before we sell if rates could not be negotiated down?
Hi Alan,
Thank you for getting in touch with Finder.
Since the moratorium is a grace period of sorts after the loan amount has been disbursed to the borrower, I suggest that you discuss your possible options with your current lender. Now, if you’re unhappy with what they’ve provided, please seek help from a mortgage broker for your other options.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
I have a interest only loan on an investment property. The bank wants now to revert to interest and principle. This doesn’t suit me. I would like to refinance to an interest only loan with an off-set account or redraw facility.
Hi Samuel,
Thanks for getting in touch.
I’m sorry to hear about the change in your home loan. If the principal and interest type of loan does not suit you, best to communicate this with your lender so they can offer other options for you. In case they will insist on the P&I on your mortgage, you can go ahead and refinance. There are home loan refinancing options you can choose from. Brands listed on the page also offer P&I, but of course, you can contact the lender first to discuss your option for interest-only with offset and redraw facility.
Alternatively, best to speak to a mortgage broker who can consider your circumstance and offer you a wide range of refinancing options.
Hope this has helped.
Cheers,
May
i want interest only as later lookin at selling and buying retirement villa house worth 750 or so hsve 150 mortgage 1 credit card maxed to 2thousamd and 1 6 tjousand who can help me find interest only home loan in wa
Hi Marisha,
Thanks for getting in touch with finder. I hope all is well with you. :)
We do have a list of interest-only home loans on this page. Check the table above and compare your options. Once you found the right for you, click on the “Go to site” green button. Please review the criteria, details of the loan product, and its conditions, then contact the lender directly to discuss your loan options and eligibility. These providers should be able to help you even if you live in WA.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
What is your best investment comparison rate interest only for loan of 1.14 million thanks
Hi Marc,
Thanks for your inquiry.
You may refer to our interest-only investment loans comparison table to compare and view the rates of different lenders. Simply enter the $1,140,000 next to the borrowing about followed by your loan term then press “Calculate”.
You may then compare each lender based on their interest rate p.a., comp rate p.a, fees, maximum LVR, and your projected monthly repayment. If you like to see the side-by-side comparison between brands, just click the “compare box” below the brand’s logo.
Please click the name of the lender or the “More info” link to be redirected to our review page and learn more about the lender’s loan offer, rates, and requirements as well as the pros and cons of using their loan service. When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions. Alternatively, you can speak to a mortgage broker who can take your personal circumstance into account and offer you a range of borrowing options.
Cheers,
Rench