An interest-only home loan is a fantastic option for all property buyers. This flexible loan allows considerably low monthly repayment initially for a short period. This will enable borrowers to have more cash for a renovation and home improvement.
However, there is a significant drawback to interest-only home loans. The interest-only period stays for a short time, up to 3 years. And once this period gets over, borrowers need to start repaying their principal amount along with the interest rate.
This article will offer you valuable insight into the interest-only home loan option. Let’s dig in to explore more about it.
What is an Interest-Only Home Loan?
All interest-only home loans can be assorted, but they share a common base. Borrowers are exempted from paying the principal amount for a significant period, usually up to 3 years. This deliberately reduces the monthly payment value compared to principal and interest loans.
Nevertheless, there comes a time when the interest-only period exhausts. And that is precisely when borrowers need to start repaying their principal amount. This sudden shift of repayment value can be excruciating for borrowers. So it is advised to choose this loan option wisely if the situation and income permit.
What are the Features of Interest-Only Home Loans?
The interest-only home is a fantastic option but should only be opted for if your financial requirements demand it. Standard Chartered Bank grants the feature of a home loan balance transfer, through which you can transfer your existing loan to another bank. So if you feel that you need to change your lender for any reason whatsoever, you can always choose Standard Chartered Bank.
Like other home loan options, interest-only home loans have fantastic features, including:
● Improved Cash Flow
Obtaining an interest-only home loan deliberately improves your cash flow. As you can save more, you can have more cash in your hand. And you can put these savings for renovation or home improvement.
● Reduced Monthly Cash Flow
The interest-only home loan allows you to repay the interest amount only for 36 months. And after the interest-only period terminates, you need to start repaying your complete EMI, consisting of the principal and interest value. So this loan option will automatically lower your monthly outflow in the initial stage.
● Remarkable Flexibility
If you apply for an interest-only home loan, you can enjoy magnificent flexibility. This provides you with the chance to commence your EMI much earlier.
● Improved Cash Savings
Opting for an interest-only home loan will significantly help you lower your monthly repayment value. For a maximum of three years, you can enjoy the benefits of the interest-only period. And this will deliberately help you boost your cash savings for some time.
If the situation persists, you can make good use of your cash savings. You can either use it for home improvement or for your requirements.
Advantages of Opting for an Interest-Only Home Loan
Some of the magnificent benefits of interest-only home loans are:
- It comes with attractive interest rates
- It helps you purchase a house of your own and become the sole owner after completing the repayment
- It comes with a straightforward and hassle-free documentation procedure
- It grants you access to higher amounts of funds
- You can use the received funds for both personal and business requirements
- You can get your interest-only loan sanctioned even before selecting your desirable property
It would be best to remember that almost every home loan has floating interest rates. As the current interest rates are considerably lower, an interest-only loan option will be a great choice. You can repay your loan better, significantly bringing down your outstanding liability.