Which Mortgage Is Right For You? Interest Only vs Principal & Interest Loans | Pros & Cons Explained

Which is better? Having an Interest Only Mortgage or paying off a Principal and Interest Home Loan? When choosing the right loan for you, a good place to start is deciding between an Interest only vs Principal and Interest Home Loan. But what exactly are they, and what's the difference? In this video, we look at the pros and cons of each kind of mortgage and how to choose which would be better for you in 2022. 

Of course, a good place to start is deciphering each kind of loan entails. A Principal and Interest Home Loan is when there's a component of your repayments that go towards paying down the principal balance of the loan (the amount you borrowed) and a component that goes towards interest (the cost of borrowing).

Contrastingly, an Interest Only Home Loan means you only repay the monthly interest on the amount borrowed for a set term (usually no more than five years). During this time, no repayments are required to reduce the principal amount borrowed, which means the loan balance doesn't reduce. 

So, the real question arises: Should you be paying down your loans, or is it okay to go Interest Only for cash flow? I break down these exact two scenarios with real-life examples and try to ascertain the benefits and disadvantages of each type of loan. Let's jump in. 

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Please see below a breakdown of the content covered in today's video:

00:00 Which Mortgage Is Right For You? Interest Only vs Principal and Interest Loans
00:15 What's the difference between an Interest Only Vs Principal and Internet Home Loan?
01:03 Advantages of Interest Only Loan 
01:05 1. Interest Only Loans Turn Existing properties Into Investments 
01:27 2. Temporary Falls In Income Are Covered With Interest Only Loans
02:06 3. Impacts on Construction & Renovation 
02:33 Cons of Interest Only Loan. Why banks have limited these home loans.
02:36 1. Interest Rates Are Far Higher on Interest Only Loans
03:02 2. Banks Have Cracked Down On Interest Only Loans
03:18 Benefits of Principal and Interest Loans
03:20 1. You Are Paying Off Your Debt!
03:35 2. You Can Get Higher Leverage On Property (all the way up to 95%!)
05:36 3. No Repayment Shock with P&I Home Loans
06:09 Principal & Interest Home Loan - A Real Life Example
07:43 Home Loan Calculator - Breaking Down Interest Rates & Repayments
08:28 When it makes sense to do Principal and Interest Home Loans
09:08 Our Final Thoughts - Interest Only Vs Principal and Internet Home Loan

If you'd like to know the 8 Types of Home Loans and which is best for you, view the below video -    • 8 Types of Home Loans [Which is Best ...  

Or if you'd like to uncover the best mortgage deals for First Home Buyers -    • Home Loans For First Time Buyers [Bes...  

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