Reasons to pay principal and interest

Home loan repayments don’t have to be confusing. Find out how choosing the right repayment option for you could help you pay off your mortgage sooner or fund your next project.

What are my repayment options?

If you choose to make principal and interest repayments, you’re paying down both the loan amount (the principal) and the interest. Interest only repayments only pay down the interest, for a set period of time - usually one to five years.

Why pay principal and interest?

Lower interest rates and repayments overall

You typically get a lower interest rate when you make principal and interest repayments, and because you’re reducing your loan amount each month, you could pay less interest over the life of your loan.

No matter which repayment option you choose, the length of your loan remains the same. With an interest only loan, you’ll still have the full loan amount to pay off when the interest only period ends, but in less time.

Build up your equity

Equity is the difference between the market value of your home and what you owe on your loan. Your equity grows as you pay off your loan amount (even more so if the value of your property goes up) - you could use it to fund renovations or an investment property.

Considering the options below

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Things you should know

Related document:
Choosing Your Home Loan Repayment Option (PDF)

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.