Is it better to pay my home loan’s principal and interest or interest only?

Answer

Whether you decide to pay the principal and interest or just the interest on your loan will depend on your objectives and financial situation.

A home loan has two parts:

  • the principal―the amount you borrow to buy a property, and
  • the interest―what you’re charged by the lender for borrowing the principal.

Most home buyers arrange to repay the loan in full over time. That means their repayments pay the principal and the interest.

Investors may choose to pay the interest only―not the principal―because the interest on an investment loan is tax deductible. However, paying the interest only means the principal will not be reduced at all.

When you’re looking for the right loan, ask the lender or a financial adviser to show you the difference your repayments can make over time or use our cost of home loan calculator.

 

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Important information

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It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions before deciding what’s right for you. This information hasn’t taken your circumstances into account.

This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.