January is the month when people finally stop avoiding their finances.
After the noise of December settles, many Australians open their bank statements and realise something uncomfortable:
their home loan or investment loan is no longer working the way they assumed it would.
For homeowners and investors on interest-only loans, January is a particularly important time to pause, review, and reset, because many people are about to face a major change they didn’t plan for.
Why January Is a Critical Review Month for Interest-Only Loans
Interest-only (IO) loans are often taken out for flexibility, cash flow, or tax strategy, particularly by investors and self-employed borrowers.
But what many people don’t realise is this:
Banks do not automatically extend interest-only periods.
When your IO period expires, your loan usually reverts to principal and interest (P&I) -often over a shorter remaining loan term.
That can mean:
- Higher repayments
- Reduced cash flow
- Pressure on serviceability
- And in some cases, financial stress that could have been avoided with planning
January is when these surprises start landing.
What Happens When an Interest-Only Period Ends?
When an IO term expires, three things usually happen at once:
- Your repayments increase
You’re now repaying both principal and interest - often over a reduced timeframe. - Your loan is reassessed if you want to extend IO
Extending an IO period is not automatic. It requires a full credit assessment under today’s lending rules, not the rules that applied when you first took the loan. - Your borrowing power may be lower than before
Lending policies are tighter, living expenses are scrutinised more closely, and lending assessment rate buffers may be higher.
This is why many borrowers are shocked to discover that what was once easily approved may no longer be available.
The Biggest Mistake I See Every January
The most common mistake I see clients make is waiting until the IO period has already expired before seeking advice.
At that point:
- Your repayments may have already jumped
- Your options may be limited
- And the bank holds most of the leverage
The smartest strategies are always implemented before the change occurs.
Questions You Should Be Asking Right Now
If you have an interest-only loan - whether for an investment property, trust, or SMSF - January is the time to ask:
- When does my interest-only period end?
- What will my repayments increase to if it switches to P&I?
- Can I extend the IO period, and will I still qualify?
- Should this loan remain interest-only, or is it time to restructure?
- Is this lender still the right fit for my long-term strategy?
These are not rate-only questions. They are strategy questions.
Why Strategy Matters More Than Ever in 2026
In today’s lending environment:
- Many lenders reassess IO extensions over 20 years, not 30
- Trust and SMSF lending is more restricted
- Living expenses and existing liabilities are assessed conservatively
- Some lenders no longer support split or flexible structures
This means that what worked five years ago may not be in your best interest today.
A strategic review can often:
- Improve cash flow
- Reduce risk
- Align your loan structure with your broader wealth plan
- And prevent rushed decisions later in the year
January Is About Control Not Panic
A January loan review isn’t about making drastic moves.
It’s about:
- Understanding your position
- Knowing your options
- And making calm, informed decisions before urgency takes over
This is exactly how financial confidence is built - not through reaction, but through clarity.
Your Next Step
If you’re unsure about:
- Your interest-only expiry date
- What happens next
- Or whether your current loan still supports your goals
Start with clarity.
I’ve created a simple, practical Clarity-to-Confidence Mortgage Planning Checklist to help you review your loan position and identify what needs attention, before small issues become expensive ones.
January is the perfect time to reset your strategy and step into the year feeling informed, prepared, and in control.