Interest just vs Principal & Interest: expense distinction example
Desmond and Rachael have both discovered houses to purchase and chose to sign up for split loans of $400,000 for three decades. Desmond chooses a loan that is p&i while Rachael opts to pay for interest-only for the very very very first 5 years before switching to P&I for the staying 25 years.
When it comes to purposes of the contrast, it is thought both Desmond and Rachael have actually the exact same rate of interest of 4.0per cent which holds steady within the three decades.
As shown within the table above, by just interest that is paying the very first 5 years of this home loan, Rachael’s loan will surely cost her $25,926 a lot more than Desmond’s within the three decades.
Interest-only mortgage loans for owner-occupiers?
Interest-only loans are an excellent short-term solution for property investors and owner-occupiers alike, nevertheless it’s crucial to keep in mind that you’ll need to make major repayments at some time along the track.