Not usually over the full term, because principal is repaid later and total interest can be higher.
What is Interest-Only (IO)?
Quick definition
Interest-only repayments cover interest only for a set period, with principal usually repaid later.
Home loansInvestingGeneral
Overview
An Interest-Only period means scheduled repayments typically cover interest but do not materially reduce the loan principal.
When the IO period ends, repayments often rise because the remaining principal must be repaid over a shorter residual term.
IO structures are common in some investment scenarios but require careful cash-flow planning for the post-IO transition.
Why it matters
- Can lower initial repayments and preserve short-term cash flow.
- Can increase repayment shock when converting to principal repayment.
- May lead to higher total interest over the full loan life.