Finance Hub
Interest Only vs Principal & Interest
Choosing how you repay your loan shapes your cash flow and how quickly you build equity. We introduce you to independent, licensed brokers who explain which structure suits your goals.
Principal and interest
With principal-and-interest repayments, each payment chips away at both the interest and the amount you borrowed. Over time your loan balance falls and your equity grows. Most owner-occupiers use this structure because it steadily pays down the debt.
Interest only
Interest-only repayments cover just the interest for a set period, keeping repayments lower in the short term but not reducing the balance. Some investors choose this to manage cash flow, though the balance still needs repaying eventually and total interest can be higher over the life of the loan.
Interest-only periods are time-limited, and repayments usually rise once the period ends. It is important to plan for that change rather than be surprised by it.
How we help
The right choice depends on your goals, tax position, and cash flow. We connect you with independent, licensed brokers who talk it through — we do not give credit advice ourselves.
Related reading
- Support for property investors — how repayment structure fits a broader investment plan.
- Mortgage and finance mistakes — loan structure errors that hurt borrowers long term.
Frequently asked questions
Is interest only cheaper?
Repayments are lower during the interest-only period, but because you are not reducing the balance, total interest over the loan can end up higher. A broker can model both for you.
Which is better for investors?
There is no universal answer — it depends on your strategy and circumstances. Licensed brokers and accountants can help you decide.