Home loan repayments are based on paying off two factors: the principal (loan amount owing) and the interest (rate set by the lender charged on the principal).
Most home loan repayments in Australia are designed to pay both the principal and interest each time. However, some lenders do allow homeowners the option of paying just the interest with their repayments, also known as an interest only home loan. By only paying for the interest charges on your home loan, your repayments are significantly reduced.
Home loans with interest only repayments are typically set to revert to principal and interest repayments after several years. This is because by only repaying interest charges, you’re not actually chipping away at your principal owing - meaning, your home loan debt is never actually being repaid.