Best Interest-Only Home Loan Rates Compared

  • See the top interest-only home loan offers, with rates starting from 5.84% p.a.^ (comparison rate).
Interest only home loans
Interest only home loans

In our interest-only home loans guide:

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Best interest-only home loans in Australia (variable rates)

The table shows a selection of variable rate interest-only home loans for owner occupiers, sorted by the lowest comparison rate, then the lowest interest rate.

Greater Bank - Great Rate Home Loan

Variable interest rate

5.84% p.a.

Comparison rate^

5.84% p.a.

Features
  • Extra repayments allowed
  • Free redraw
Maximum loan to value ratio (LVR)

80%

Qudos Bank - No Frills Home Loan

Variable interest rate

6.09% p.a.

Comparison rate^

5.86% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

70%

Tiimely Home - Variable Home Loan (formerly Tic:Toc)

Variable interest rate

6.84% p.a.

Comparison rate^

5.86% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

90%

Australian Mutual Bank - Special Offer 3-year Discounted Basic Variable Rate

Variable interest rate

5.49% p.a.

Comparison rate^

5.86% p.a.

Features
  • Redraw facility
Maximum loan to value ratio (LVR)

80%

Newcastle Permanent - Real Deal Interest Only

Variable interest rate

5.89%p.a.

Comparison rate^

5.87%p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

80%

Community First Bank - True Basic Variable Home Loan

Variable interest rate

6.04% p.a.

Comparison rate^

5.65% p.a.

Features
  • Free redraw
Maximum loan to value ratio (LVR)

95%

Great Southern Bank - Basic Variable Construction Interest Only

Variable interest rate

5.89% p.a.

Comparison rate^

5.95% p.a.

Features
  • Unlimited extra repayments
  • Redraw
Maximum loan to value ratio (LVR)

70%

Qudos Bank - No Frills Home Loan

Variable interest rate

6.19% p.a.

Comparison rate^

5.96% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

80%

HSBC - Home Value Loan

Variable interest rate

6.34% p.a.

Comparison rate^

5.98% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

80%

Great Southern Bank - Offset Variable Construction Interest Only

Variable interest rate

5.94% p.a.

Comparison rate^

6.00% p.a.

Features
  • 100% offset account
  • Unlimited extra repayments with redraw
Maximum loan to value ratio (LVR)

70%

Easy Street - Street Smart Variable

Variable interest rate

6.24% p.a.

Comparison rate^

6.02% p.a.

Features
  • 100% offset account
  • Redraw facility
Maximum loan to value ratio (LVR)

95%

The Capricornian - No Frills Home Loan (Construction)

Variable interest rate

5.99% p.a.

Comparison rate^

6.03% p.a.

Features
  • Unlimited extra repayments
  • Free online redraw
Maximum loan to value ratio (LVR)

80%

IMB - Budget Home Lona

Variable interest rate

6.14% p.a.

Comparison rate^

6.03% p.a.

Features
  • Unlimited extra repayments
  • Free online redraw
Maximum loan to value ratio (LVR)

95%

BCU Bank OMG Home Loan

Variable interest rate

6.64% p.a.

Comparison rate^

6.04% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

79%

Qudos Bank - Construction Home Loan

Variable interest rate

From 6.19% p.a.

Comparison rate^

6.05% p.a.

Features
  • Progress Payments
  • Offset facility
Maximum loan to value ratio (LVR)

80%

Australian Mutual Bank - Basic Variable Rate Home Loan

Variable interest rate

From 5.99% p.a.

Comparison rate^

6.06% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

95%

ING - Mortgage Simplifier

Variable interest rate

From 6.34% p.a.

Comparison rate^

6.07% p.a.

Features
  • Extra repayments allowed
  • Redraw facility
Maximum loan to value ratio (LVR)

80%

Variable interest rate Comparison rate^FeaturesMaximum loan to value ratio (LVR)

Greater Bank - Great Rate Home Loan

5.84% p.a.

5.84% p.a.

  • Extra repayments allowed
  • Free redraw

80%

Qudos Bank - No Frills Home Loan

6.09% p.a.

5.86% p.a.

  • Extra repayments allowed
  • Redraw facility

70%

Tiimely Home - Variable Home Loan (formerly Tic:Toc)

6.84% p.a.

5.86% p.a.

  • Extra repayments allowed
  • Redraw facility

90%

Australian Mutual Bank - Special Offer 3-year Discounted Basic Variable Rate

5.49% p.a.

5.86% p.a.

  • Redraw facility

80%

Newcastle Permanent - Real Deal Interest Only

5.89%p.a.

5.87%p.a.

  • Extra repayments allowed
  • Redraw facility

80%

Community First Bank - True Basic Variable Home Loan

6.04% p.a.

5.65% p.a.

  • Free redraw

95%

Great Southern Bank - Basic Variable Construction Interest Only

5.89% p.a.

5.95% p.a.

  • Unlimited extra repayments
  • Redraw

70%

Qudos Bank - No Frills Home Loan

6.19% p.a.

5.96% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

HSBC - Home Value Loan

6.34% p.a.

5.98% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

Great Southern Bank - Offset Variable Construction Interest Only

5.94% p.a.

6.00% p.a.

  • 100% offset account
  • Unlimited extra repayments with redraw

70%

Easy Street - Street Smart Variable

6.24% p.a.

6.02% p.a.

  • 100% offset account
  • Redraw facility

95%

The Capricornian - No Frills Home Loan (Construction)

5.99% p.a.

6.03% p.a.

  • Unlimited extra repayments
  • Free online redraw

80%

IMB - Budget Home Lona

6.14% p.a.

6.03% p.a.

  • Unlimited extra repayments
  • Free online redraw

95%

BCU Bank OMG Home Loan

6.64% p.a.

6.04% p.a.

  • Extra repayments allowed
  • Redraw facility

79%

Qudos Bank - Construction Home Loan

From 6.19% p.a.

6.05% p.a.

  • Progress Payments
  • Offset facility

80%

Australian Mutual Bank - Basic Variable Rate Home Loan

From 5.99% p.a.

6.06% p.a.

  • Extra repayments allowed
  • Redraw facility

95%

ING - Mortgage Simplifier

From 6.34% p.a.

6.07% p.a.

  • Extra repayments allowed
  • Redraw facility

80%

Rates are current as of 27 October 2023. ^Warning: Comparison rates are calculated based on a loan amount of $150,000 repaid over a 25-year term with monthly repayments. Different loan amounts and terms will result in different comparison rates. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you. While this is an extensive list of the lowest-rate interest-only home loans in Australia, we can't guarantee that all loans available in the market are shown.

Best interest-only home loans in Australia (fixed rates)

The table shows a selection of fixed rate interest-only home loans for owner occupiers, sorted by the lowest interest rate, then the lowest comparison rate.

Arab Bank Australia - Fixed Rate Home Loan (1 year)

Interest rate

5.50% p.a. for 1 year

Comparison rate^

7.37% p.a.

Features
  • Loan portability available
Maximum loan to value ratio

60%

Arab Bank Australia - Fixed Rate Home Loan (2 Year)

Interest rate

5.80% p.a. for 2 years

Comparison rate^

7.23% p.a.

Features
  • Loan portability available
Maximum loan to value ratio

60%

Queensland Country Bank - Special Fixed Package Rate (1 year)

Interest rate

5.94% p.a. for 1 year

Comparison rate^

6.28% p.a.

Features
  • 100% mortgage offset
  • Redraw facility
Maximum loan to value ratio

80%

Greater Bank - Great Rate Home Loan Fixed (2 or 3 year)

Interest rate

5.89% p.a. for 2 or 3 years

Comparison rate^

7.35% p.a. (2 years); 7.19% p.a. (3 years)

Features
  • Free redraw available
Maximum loan to value ratio

80%

Greater Bank - Ultimate Home Loan Fixed (2 or 3 year)

Interest rate

5.89% p.a. for 2 or 3 years

Comparison rate^

7.52% p.a. (2 years); 7.38% p.a. (3 years)

Features
  • Free redraw available
Maximum loan to value ratio

80%

Community First bank - Accelerator Package Home Loan Fixed (3 year)

Interest rate

5.99% p.a. for 3 years

Comparison rate^

6.21% p.a.

Features
  • 100% offset account
  • Redraw available
Maximum loan to value ratio

95%

G&C Mutual Bank - Fixed Rate Home Loan (1 year)

Interest rate

6.09% p.a. for 1 year

Comparison rate^

6.14% p.a.

Features
  • Extra repayments of up to 5% of the loan balance per year
  • Redraw available
Maximum loan to value ratio

95%

Easy Street - Fixed home loan (3 Year)

Interest rate

6.09% p.a. for 3 years

Comparison rate^

5.92% p.a.

Features
  • 100% offset account
  • Redraw available
Maximum loan to value ratio

95%

Qudos Bank - Fixed Rate Home Loan (3 year)

Interest rate

6.09% p.a. for 3 years

Comparison rate^

6.02% p.a.

Features
  • Extra repayments up to $10,000 a year
Maximum loan to value ratio

80%

Greater Bank - Great Rate Home Loan Fixed (4 or 5 year)

Interest rate

6.09% p.a. for 4 or 5 years

Comparison rate^

7.12% p.a. (4 years); 7.00% p.a. (5 years)

Features
  • Free redraw available
Maximum loan to value ratio

95%

Greater Bank - Ultimate Home Loan Fixed (2 or 3 year)

Interest rate

6.09% p.a. for 4 or 5 years

Comparison rate^

7.32% p.a. (4 years); 7.22% p.a. (5 years)

Features
  • Free redraw available
Maximum loan to value ratio

95%

BCU Bank - Fixed Rate Home Loan (3 year)

Interest rate

6.14% p.a. for 3 years

Comparison rate^

6.04% p.a.

Features
  • Extra repayments up to $25k during fixed period
Maximum loan to value ratio

95%

Community First bank - Accelerator Package Home Loan Fixed (1 or 2 year)

Interest rate

6.19% p.a. for 1 or 2 years

Comparison rate^

6.21% p.a. (1 year); 6.23% p.a. (2 years)

Features
  • 100% offset available (capped at $20k on fixed rate loans).
Maximum loan to value ratio

95%

Bank of China - Fixed Rate Home Loan (1-3 years)

Interest rate

6.19% p.a. for 1-3 years

Comparison rate^

8.10% p.a. (1 year); 7.91% p.a. (2 years); 7.74% p.a. (3 years)

Features
  • Extra repayments of up to $10k/year
  • Redraw available
Maximum loan to value ratio

80%

G&C Mutual Bank - Fixed Rate Home Loan (2 year)

Interest rate

6.19% p.a. for 2 years

Comparison rate^

6.24% p.a.

Features
  • Extra repayments of up to 5% of the loan balance per year
  • Redraw available
Maximum loan to value ratio

95%

BCU Bank - Fixed Rate Home Loan (2 year)

Interest rate

6.19% p.a. for 2 years

Comparison rate^

6.04% p.a.

Features
  • Extra repayments up to $25k during fixed period
Maximum loan to value ratio

95%

Newcastle Permanent - Premium Plus Package Fixed Rate (2 year)

Interest rate

6.19%p.a. for 2 years

Comparison rate^

7.60%p.a.

Features
  • Extra repayments allowed up to $25k/year
  • redraw facility
Maximum loan to value ratio

80%

Interest rate Comparison rate^FeaturesMaximum loan to value ratio

Arab Bank Australia - Fixed Rate Home Loan (1 year)

5.50% p.a. for 1 year

7.37% p.a.

  • Loan portability available

60%

Arab Bank Australia - Fixed Rate Home Loan (2 Year)

5.80% p.a. for 2 years

7.23% p.a.

  • Loan portability available

60%

Queensland Country Bank - Special Fixed Package Rate (1 year)

5.94% p.a. for 1 year

6.28% p.a.

  • 100% mortgage offset
  • Redraw facility

80%

Greater Bank - Great Rate Home Loan Fixed (2 or 3 year)

5.89% p.a. for 2 or 3 years

7.35% p.a. (2 years); 7.19% p.a. (3 years)

  • Free redraw available

80%

Greater Bank - Ultimate Home Loan Fixed (2 or 3 year)

5.89% p.a. for 2 or 3 years

7.52% p.a. (2 years); 7.38% p.a. (3 years)

  • Free redraw available

80%

Community First bank - Accelerator Package Home Loan Fixed (3 year)

5.99% p.a. for 3 years

6.21% p.a.

  • 100% offset account
  • Redraw available

95%

G&C Mutual Bank - Fixed Rate Home Loan (1 year)

6.09% p.a. for 1 year

6.14% p.a.

  • Extra repayments of up to 5% of the loan balance per year
  • Redraw available

95%

Easy Street - Fixed home loan (3 Year)

6.09% p.a. for 3 years

5.92% p.a.

  • 100% offset account
  • Redraw available

95%

Qudos Bank - Fixed Rate Home Loan (3 year)

6.09% p.a. for 3 years

6.02% p.a.

  • Extra repayments up to $10,000 a year

80%

Greater Bank - Great Rate Home Loan Fixed (4 or 5 year)

6.09% p.a. for 4 or 5 years

7.12% p.a. (4 years); 7.00% p.a. (5 years)

  • Free redraw available

95%

Greater Bank - Ultimate Home Loan Fixed (2 or 3 year)

6.09% p.a. for 4 or 5 years

7.32% p.a. (4 years); 7.22% p.a. (5 years)

  • Free redraw available

95%

BCU Bank - Fixed Rate Home Loan (3 year)

6.14% p.a. for 3 years

6.04% p.a.

  • Extra repayments up to $25k during fixed period

95%

Community First bank - Accelerator Package Home Loan Fixed (1 or 2 year)

6.19% p.a. for 1 or 2 years

6.21% p.a. (1 year); 6.23% p.a. (2 years)

  • 100% offset available (capped at $20k on fixed rate loans).

95%

Bank of China - Fixed Rate Home Loan (1-3 years)

6.19% p.a. for 1-3 years

8.10% p.a. (1 year); 7.91% p.a. (2 years); 7.74% p.a. (3 years)

  • Extra repayments of up to $10k/year
  • Redraw available

80%

G&C Mutual Bank - Fixed Rate Home Loan (2 year)

6.19% p.a. for 2 years

6.24% p.a.

  • Extra repayments of up to 5% of the loan balance per year
  • Redraw available

95%

BCU Bank - Fixed Rate Home Loan (2 year)

6.19% p.a. for 2 years

6.04% p.a.

  • Extra repayments up to $25k during fixed period

95%

Newcastle Permanent - Premium Plus Package Fixed Rate (2 year)

6.19%p.a. for 2 years

7.60%p.a.

  • Extra repayments allowed up to $25k/year
  • redraw facility

80%

Rates are current as of 27 October 2023. ^Warning: Comparison rates are calculated based on a loan amount of $150,000 repaid over a 25-year term with monthly repayments. Different loan amounts and terms will result in different comparison rates. Check with the provider for full loan details, including rates, fees, eligibility and terms and conditions to make sure the product is right for you. While this is an extensive list of the lowest-rate interest-only home loans in Australia, we can't guarantee that all loans available in the market are shown.

How do interest-only home loans work?

With an interest-only home loan your repayments only go towards paying off the interest charged by the lender on your loan for a set period. You won’t be paying off the home loan itself (the principal) during the interest-only period.

Because of this, repayments on an interest-only home loan will generally be lower than repayments on a comparable principal and interest home loan.

Here are the key aspects to how interest-only home loans work:

  • The interest-only period for owner-occupiers is generally limited to a duration of between 1 and 5 years.
  • Interest-only periods for investment property loans are generally longer, e.g. up to 10 years.
  • The interest-only period is usually at the start of the loan term, but not always.
  • It may be possible to split up the interest-only portion of the loan, so you’re not taking it all in one go.
  • Some lenders set a maximum duration – e.g. five years – that can be taken consecutively as an interest-only period, even if the overall interest-only allowance is longer.
  • At the end of the interest-only period, your home loan will revert back to principal and interest repayments.

Expert tip: Think about your interest-only 'exit strategy'

Mansour Soltani

“If you’re considering an interest-only home loan, you need to know what your plan is for transitioning to principal and interest repayments so you're actually paying down the debt. Depending on your age, staying on interest-only for a long time could mean you still have a big home loan debt as you approach retirement.”

Mansour Soltani, Money.com.au's home loan expert

Interest-only loans versus principal and interest

Interest-only

  • You’re not paying down the loan amount.
  • Lower repayments during the interest-only period, followed by higher repayments once it ends.
  • Generally a higher rate of interest than on principal and interest loans.
  • You’ll pay more interest overall.

Principal and interest

  • You’re paying off both the loan amount and the interest charged by the lender.
  • Repayments stay steady throughout the loan, subject to interest rate changes on variable rate home loans).
  • Usually lower interest rates available.
  • You’ll pay less interest overall.

Interest-only home loan cost comparison

Principal & interest home loanInterest-only home loan (1-year)Interest-only home loan (5-year)

Loan term

30

30

30

Loan amount

$600,000

$600,000

$600,000

Interest rate

6%

6%

6%

Monthly repayment during interest-only period

$3,597

$3,000

$3,000

Monthly repayment after interest-only period

$3,597

$3,642

$3,866

Total interest cost over the life of the loan

$695,029

$703,426

$739,743

Extra interest paid over the life of the loan

n/a

$8,397

$44,714

This is a hypothetical example only and does not factor in loan fees and other costs. Actual costs and differences will be different depending on the details of the loans.

Reasons you might choose an interest-only home loan

1

Construction loan

During construction of a new home when costs are high borrowers may benefit from lower repayments until construction is complete.

2

Bridging finance

If you buy a new home before you sell your current one, lower interest-only repayments may temporarily ease the financial burden and impact of property costs.

3

Property investment

Some investors choose interest-only repayments on their investment property home loan to minimise initial costs and free up cash to invest elsewhere. Interest may be a tax-deductible expense for some investors, so paying more interest overall on a loan may be less of a concern.

4

If you need reduced repayments for a period

If your circumstances change and your household’s income decreases (for example, after the birth of a child) interest-only repayments can provide temporary relief.

5

Paying off other debt

If you have other debt with higher interest rates than your home loan, such as credit cards or personal loans, switching to lower interest-only repayments on your home loan can temporarily free up money to repay that debt.

Australia's Money Matchmaker matching you with your best loans across multiple lenders
An interest-only period is a potential alternative to taking a ‘repayment holiday’ on your loan where your repayments would be paused entirely. If you’re not paying back anything at all, interest will compound on your loan (i.e. you’ll be charged interest on the interest already added to your balance).

Benefits of interest-only home loans

Consolidating debt

Lower initial repayments

dollar icon

Free up cash to use elsewhere

Credit Score

Choose your interest-only duration

Best match guarantee

Available from most lenders

Drawbacks of interest-only home loans

Bank Statement Health

Higher repayments after the interest-only term

Interest and fees

Higher interest rates apply

Bank Statement Health

More interest to pay overall

Lender loan assessment

You don’t build equity in your property

Switching from interest-only to principal and interest repayments

One of the biggest risks with interest-only loans is the increase in repayments when the loan reverts to principal and interest at the end of the interest-only period.

In some cases, the repayment amount will increase significantly, which can cause significant financial strain if you’re not prepared for it.

To get ready for your repayment amount to increase after your interest-only period ends you can:

  • Make sure you’re aware of when your repayment will increase and by how much when the loan reverts to principal and interest.
  • Make room in your budget to accommodate the extra cost a few months in advance of when your repayments switch.
  • Save money during the interest-only period, if possible. This can help ease the financial pressure when your loan reverts to principal and interest repayments.
  • Talk to your lender and ask for support in advance of the switch to principal and interest repayments if you can’t afford the repayment increase.
  • Consider extending your interest-only period if that's an option, or consider refinancing your home loan with another lender if you find a better deal and are eligible.
How to apply for a credit card

Applying for an interest-only home loan

Getting approved for an interest-only loan can be more difficult than it is for a principal and interest loan. That’s because interest-only loans are generally considered to be riskier by lenders.

To make your application as strong as possible you can:

  • Save more: If it's a first-home buyer loan and you have a large deposit, your bank will view you as less of a risk. Aim for a deposit of at least 20% (80% loan to value ratio).
  • Justify your choice: If you have a clear justification for applying for an interest-only loan (e.g. it is just a temporary bridging loan) your lender may look at your application more favourably.
  • Apply through a broker: If you’re unsure whether or not your bank will approve your interest-only home loan application, engaging a mortgage broker with experience helping borrowers in your situation may improve your chances.

Interest-only home loans FAQs

An interest-only home loan is a loan that only requires you to make interest payments for a fixed period of time. When that period ends, your repayments will revert to principal and interest.

In some cases, interest-only repayments may be suitable for a property investment home loan. The idea is to minimise property costs (i.e. interest on the investment loan) and to use that money for other investments. There are risks to this strategy, however, and it generally relies on the property increasing in value during the interest-only period.

Investors should always talk to an expert for advice before opting for an interest-only home loan, as they can be risky and very expensive if things don’t work out.

All of the big four banks (ANZ, NAB, Commbank & Westpac) and most other lenders offer interest-only home loans. That includes non-bank lenders, credit unions, plus non-bank lenders offering low doc and bad credit home loans. You can get an interest-only home loan directly from a lender or through a mortgage broker.

Interest-only home loans tend to come with higher interest rates compared to principal and interest home loans. And while your loan will cost you less in repayments during the interest-only period, you typically pay more interest overall with an interest-only home loan.

To apply for an interest-only home loan you will usually need a deposit of at least 5% of the property value. Put another way, the minimum loan-to-value ratio is typically 95%.

However, unless you have a deposit of at least 20%, you may need to pay for lender’s mortgage insurance.

Home Loans guides and resources

What's the next step on your property journey? Our home loan guides will help you navigate the road ahead, whether you're buying, building or looking to save on an existing loan.

Written by

Sean Callery Editor Money.com.au

Editor

Sean Callery

Reviewed by

Mansour Soltani home loan expert

Home Loans Expert

Mansour Soltani

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