The maximum interest-only (IO) term for Pro Pack products has been extended from 5 years to up to 10 years!
This change is applicable to both investors and owner-occupiers, offering greater flexibility and strategic financial planning potential. Take a look at the following case studies.
Before considering this option, please note:
For new customers there is no assessment during the IO term.
Whereas for existing customers with IO facilities who are wishing to extend their IO term, up to a maximum of 10 years, a full serviceability assessment will be required.
Investors case study:
Jeffrey & Paula are approaching retirement. They own their primary residence outright, but still owe $600,000 on their investment property they’ve owned for 8 years, which is worth $1,200,000.
They would like to spend more time travelling before they retire, however doing this whilst juggling loan repayments is difficult. They would prefer not to sell their investment property yet, as there is still strong capital gain potential prior to retirement.
How a 10-year interest-only loan can help them
Refinancing their $600k home loan to a 10-year interest-only loan, with a loan term of 30 years, will see the repayment drop to $3,055. This is a saving of $1,026 per month to put toward their lifestyle goals.
| Loan held for (years) | Starting debt | Repayment (P&I p/mth) | Current debt | New repayment (IO p/mth) | Savings (mth) |
| 8 | $685,000 | $4,081 | $600,000 | $3,055 | ~$1,026 |
| 10 | $718,000 | $4,277 | $600,000 | $3,055 | ~$1,222 |
| 12 | $760,000 | $4,527 | $600,000 | $3,055 | ~$1,472 |
| 14 | $814,000 | $4,849 | $600,000 | $3,055 | ~$1,794 |
| 15 | $846,000 | $5,040 | $600,000 | $3,055 | ~$1,985 |
Things to consider
Opting for an interest-only loan increases the total interest paid over the life of the loan. For example, refinancing a $600,000 loan - originally held for 8 years on principal and interest terms into a new 30-year interest-only loan, raises the interest payable over the next 10 years from $308,658 to $366,600, an increase of $57,942.
However, this approach unlocks an additional $123,120 in cash flow over that same 10-year period, offering borrowers greater financial flexibility.
A study by CoreLogic Australia showed that the most recent decade (2012-2022) saw a national dwelling value increase of 72%, while the period between 2002-2012 saw a 59% increase. Therefore based on similar growth rates, a property currently valued at $1 million could potentially increase in value by approximately $655,000 over the next 10 years.
Owner occupied case study:
Katherine and Matthew, long-time homeowners nearing retirement and have seen significant capital growth in their property over the past 20 years. With a home now valued at $3 million and a remaining mortgage of $425,000, they’re in a strong equity position and looking to use it meaningfully.
They hope to provide an early inheritance to their children, build a share portfolio to generate passive income, and take a well-earned dream holiday. Their budget is currently comfortable, and they’re not looking to stretch it further. The catch? They want to achieve all this without increasing their current monthly mortgage repayments.
A Strategic Refinancing Opportunity
As a broker, you can help clients like Katherine and Matthew unlock their equity through a 10-year interest-only home loan. By refinancing to an interest-only structure and accessing $475,000 in additional equity, their new loan balance would total $900,000—yet their repayments would remain at $4,530 per month, the same as they currently pay.
This structure allows them to:
- Gift $100,000 to each of their adult children
- Invest $200,000 into a share portfolio, creating a new income stream
- Allocate $75,000 towards travel or lifestyle goals
More importantly, they retain approximately $2 million in equity in their property—all without increasing their monthly financial outgoings.
Things to consider
While the short-term benefits are attractive, it’s important to have transparent conversations around the long-term implications:
- Higher total interest: Switching back to an interest-only structure on a longer loan term will increase the total interest payable. Over the next 10 years alone, interest costs rise from $147,602 to $256,700. Additionally, the $475,000 equity drawdown accrues approximately $286,900 in interest.
- Post-interest-only payments: After the 10-year interest-only period concludes, repayments are projected to increase to $5,602 per month. However, expected returns from the share portfolio—assuming a 6% annual yield—could comfortably offset this rise.
Key Takeaway
Both scenarios demonstrate how interest-only lending can be a powerful tool to support lifestyle goals and family wealth transfer, all while maintaining cash flow flexibility.