Investment4 min read
Interest-Only Loans: When Do They Make Sense?
Interest-only loans can be a smart strategy for investors, but they are not for everyone. Here is the full picture.
Raj Bhangu
Principal Mortgage Broker
15 December 2025
Key Takeaways
- 1Interest-only on $600K at 6%: $3,000/month vs P&I at $3,597/month - saves $597/month
- 2Best for: investment properties (tax deductions), cash flow management, short-term holds
- 3Warning: When IO period ends, repayments increase 25-30% substantially
Interest-only loans get a bad reputation, but used strategically, they can be a powerful financial tool, especially for property investors.
The Numbers
On a $600,000 loan at 6%:
- Interest-only repayments: $3,000/month
- Principal & Interest (30 years): $3,597/month
- Monthly difference: $597
When Interest-Only Makes Sense
- Investment properties: Maximize tax deductions
- Cash flow management: Free up funds for other investments
- Short-term hold: Planning to sell within a few years
The Catch
When the interest-only period ends, repayments increase substantially, often 25-30% more.
Want to structure your loans for maximum benefit? Book a consultation to discuss your strategy.
RB
Raj Bhangu
Principal Mortgage Broker
FBAA MemberInvestment Lending Specialist
Expert mortgage broker helping Australians achieve their property dreams with personalized home loan solutions.
Published: 15 Dec 2025