AFR Smart Investor --- Page: 88 : March 2007 Original article by Peter Cerexhe
ABIX Summary
Home owners often feel pressured to refinance mortgages when interest rates rise. Interest-only loans can appear especially attractive to investors as they enable higher loans to be serviced. In 2005 interest-only loans made up around 60 per cent of new investor loans in Australia. However these loans can be dangerous if property values fall as no buffer has been created by principal repayments. Payments off the principal amount in the first few years of a mortgage may be difficult but can significantly reduce the length of the loan. Borrowers should ensure their loans enable them to make extra payments.
