Don't wait until your repayments increase.If you have an Interest Only (IO) home loan or investment loan, it's important to know when your IO period is due to expire. Many borrowers are surprised to find their monthly repayments rise significantly once it ends sometimes by hundreds or thousands of dollars per month. The good news: with enough planning, there are usually options available. |
What is an Interest Only loan?During an Interest Only period, your repayments cover only the interest charged on your loan. That means:
| Worked example $700,000 over 30 years You borrow $700,000 over a 30-year loan and make Interest Only repayments for the first 5 years. When those 5 years end, you don't start another 30-year loan the remaining $700,000 now needs to be repaid over just 25 years.
|
Why can repayments increase so much?
| 01 You now repay the loan principalInstead of paying only interest, you begin repaying the actual amount you borrowed. | 02 There are fewer years remainingYou've already used part of the original loan term, so the balance must be repaid over a shorter period. |
The combination of these two factors often results in a substantial jump in repayments.
What if I do nothing?Many borrowers don't realise their IO period is ending until they receive their first higher repayment. Without action beforehand, you could experience:
Planning ahead gives you far more flexibility than waiting until after the repayments increase. |
What are my options?
Every situation is different, but depending on your circumstances you may be able to:
| Option 01 Extend the Interest Only periodSome lenders will consider extending your IO term, subject to current lending policy and approval. | Option 02 Refinance to another lenderA refinance may unlock a more competitive rate, better features, a fresh IO period where appropriate, or a structure that better suits your goals. |
| Option 03 Switch to Principal & InterestFor some borrowers, beginning to reduce the loan balance is the right long-term strategy we'll help you decide. | Option 04 Review your overall strategyWe consider current rates, available equity, future plans, cash flow, and whether your existing lender is still the right fit. |
|
Timing matters Review your loan 3 to 6 months before expiry.That window gives you enough time to assess your options, compare lenders, complete any refinance, avoid unnecessary repayment increases and ensure your loan continues to support your goals. Leaving it until after expiry may reduce your available options. |
|
| How Mortgage Achievers can help We monitor IO expiry dates, so you don't have to.We proactively review our clients' lending before changes occur. We'll help you understand what your repayments are likely to become, whether staying on Interest Only is appropriate, if refinancing could save you money, and which solution best aligns with your long-term objectives.
|
|
FAQ
Common Interest Only expiry questions.
Straightforward answers to help you plan ahead with confidence.
| What happens when my Interest Only period expires? | Your loan usually converts automatically to Principal & Interest repayments. That means you start repaying the original loan amount as well as the interest, which typically increases your monthly repayment. |
| How much will my repayments increase? | It depends on your loan balance, remaining term and interest rate. A common example: a $700,000 IO loan that becomes Principal & Interest with 25 years remaining can see repayments rise by several hundred dollars per month sometimes more. |
| Can I extend my Interest Only period? | Sometimes. Some lenders allow an extension if you apply and meet their current criteria, but approval is not guaranteed. It's best to start this conversation 3–6 months before expiry. |
| Should I refinance or switch to Principal & Interest? | It depends on your goals, cash flow, and the deals available. Refinancing may give you a better rate or a fresh structure; switching to Principal & Interest starts reducing your debt. We help you compare both paths. |
| When should I start reviewing my options? | Ideally 3 to 6 months before your IO period ends. This gives enough time to assess your position, compare lenders, and complete any refinance without rushing. |
| Will my lender contact me before expiry? | Most lenders do send a reminder, but it is often close to the expiry date. By then, your options may already be limited. Monitoring the date yourself or having us monitor it gives you more control. |
| Does an IO expiry affect my investment property tax deductions? | Once you begin repaying principal, the interest portion of your repayment usually decreases over time, which can affect the amount you claim. We recommend speaking with your accountant about the tax implications for your situation. |
| Is there a cost to refinance before expiry? | There can be discharge fees, valuation fees or break costs depending on your lender and loan type. We factor these into the comparison so you can see whether refinancing still makes financial sense. |
Get in touchLet's review your loan before it changes.Book a free, no-obligation chat with one of our brokers. We'll look at your IO expiry date, estimate your new repayments and walk you through the options that suit you. Melbourne office Queensland office Phone | |