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1. What is an Interest-Only home loan?
An interest-only home loan is a type of loan where you only pay the interest on the loan for a certain period. You pay only the interest on the loan amount for a set number of years, for example, 5, 7, or 10 years.
During this period, you are not paying the principal balance of your home loan. Principal is the portion of the original loan amount, while interest is the cost of borrowing the money. After the interest-only period ends, you start a regular payment period that includes the actual balance and interest.
2. How does an Interest-Only loan differ from a Principal & Interest (P&I) loan?
The following are the differences between an interest-only loan and a principal & interest (P&I) loan:
Interest-Only Loan
You pay only the interest on the loan amount for a set period, but once this period is over, you will start paying the actual balance and interest. During the interest-only period, you are not paying the principal balance, and thus, there is no principal reduction on your loan.
Principal & Interest (P&I) Loan
In a P&I home loan, you pay both the principal amount and the interest from the start. Because of this, you are reducing the principal balance and gradually building equity in your property.
Although an interest-only loan may seem manageable, this may be temporary. Before considering this type of loan, assess your current and projected financial situation to determine if you can afford higher payments after the interest-only loan period expires.
Also, consider the possibility of home value appreciation or depreciation in your area, as these can significantly affect your payment amounts once the interest-only period is over.
3. What happens when the Interest-Only period ends?
After the specific interest-only period ends, you will pay both the principal loan amount and interest.
4. Are Interest-Only loans suitable for first-time home buyers?
Interest-only loans are generally not recommended for first home buyers because of the following reasons:
Lack or limited equity buildup: The biggest disadvantage of interest-only loans is the lack of equity buildup. This type of loan is similar to renting a property without a growing ownership stake.
Payment Shock: After the interest-only period is over, buyers usually experience a dramatic payment shock as they are forced to pay the principal loan amount plus interest. This can create severe strain on the home buyer’s finances.
Negative Equity: In case of declining home values, you could end up owing more on your mortgage than your home is worth. This leads to negative equity.
Limited predictability: In Australia, interest-only loans can have either fixed or variable interest rates. This means the interest rate and your payments can fluctuate, sometimes making budgeting challenging.
First home buyers may find traditional fixed rate mortgages more suitable for their needs. This type of loan is predictable as the monthly payments remain the same throughout the loan term. You also experience steady equity growth as you regularly pay the loan amount. Finally, you can enjoy improved financial stability with more predictable and manageable long-term budgeting.
Your success
is
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We understand everyone’s circumstances are different and we take the time to understand you and your goals. We value forming lifelong relationships with all our clients and we are fully committed to adding value every step of the way.
We know that mortgages can sometimes be complex and hard to understand. We focus on simplifying the process for you and we treat your loan as if it were our very own. Let us do what we do best so there’s one less thing for you to worry about.
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Royston Cheong
17 August 2026
Trustindex verifies that the original source of the review is Google. We cannot be any happier with the service we received from Calvin and his team on our property loan. Its been a long journey given the competitive market and even so, Calvin had been professional, responsive and genuinely going above and beyond to make the whole loan process as smooth and stress free as possible. What really stood out was Calvin always made sure our best interests were at the heart of every decision rather than simply focusing on getting a loan. They took the time to understand our circumstances and helped us choose the right loan structure. Will definitely use them again and highly recommend them to anyone looking for reliable and trust worthy mortgage broker. Thank you Calvin, Shellane, Catherine and the rest of the Zenith team for getting our property loan across the line.
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Paul
27 July 2026
Trustindex verifies that the original source of the review is Google. Leon is an excellent mortgage broker - knowledgeable, forward-thinking and a great communicator throughout the entire process. Highly recommend!
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Luke Vassallo
15 July 2026
Trustindex verifies that the original source of the review is Google. Absolutely Floorless - Totally Recommend
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Andre
30 June 2026
Trustindex verifies that the original source of the review is Google. Leon and the team has been amazing to work with and has supported me well throughout my entire journey in purchasing my first home. He was always available to answer any questions or confusions I had, and was extremely fast in getting all the paperwork and processes done. Though they're the only broker I've used, I can confidently say they're one of the bests. Thank you for making the entire process so stress free for me.
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Jasmine John
29 June 2026
Trustindex verifies that the original source of the review is Google. ⭐⭐⭐⭐⭐ We had an outstanding experience with the entire team throughout our home loan refinance. A special thank you to Leon Ng, our mortgage broker, whose professionalism, knowledge, dedication, and excellent communication made the entire process smooth and stress-free. Leon went above and beyond to ensure we achieved the best outcome, and we are truly grateful for all his hard work and support. Thank you also to John Quillan, our settlement agent, for handling the settlement efficiently and keeping everything on track, and to Jeam Lisondra, our lending assistant, for being so helpful, responsive, and organised throughout the process. The teamwork, attention to detail, and exceptional customer service from everyone made what could have been a stressful experience feel easy and seamless. We highly recommend this wonderful team to anyone looking for honest, reliable, and professional home loan assistance. Thank you all for your outstanding service!
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Adarsh Kumar
26 June 2026
Trustindex verifies that the original source of the review is Google. 10/10 Leon, Jane, Shellane and the rest of the Zenith team helped us purchase our first block of land and are currently helping us build our home. Cannot recommend these guys enough!!
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brittany pearse
17 June 2026
Trustindex verifies that the original source of the review is Google. Calvin was incredibly helpful throughout the entire process, correspondence was prompt, consistent and always well informed. Calvin's help removed a great deal of stress, making our property purchase a seamless process.
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RK
10 June 2026
Trustindex verifies that the original source of the review is Google. Leon and his team from Zenith Home Loans was fantastic to deal with. He helped me refinance my loans smoothly and made the whole process simple and stress-free. There were a few hiccups with the bank along the way, but Leon sorted everything out quickly and kept me updated throughout. I really appreciated his professionalism, clear communication, and dedication. Highly recommend Leon and Zenith Home Loans to anyone looking to refinance.
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Mary Lau
4 June 2026
Trustindex verifies that the original source of the review is Google. Leon and Shellane were extraordinarily helpful, quick to business, and happy to explain everything to me as a first home buyer. Cannot recommend them and Zenith more.
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Wing Tung Tsoi
1 June 2026
Trustindex verifies that the original source of the review is Google. Working with Leon as a first home buyer was a fantastic experience. He is incredibly knowledgeable and explains everything so clearly. I had a lot of questions throughout the process, but Leon and his team were always highly responsive and very patient with me. Thank you for making this milestone so smooth and stress-free!
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Sa Yi Fu
27 May 2026
Trustindex verifies that the original source of the review is Google. Highly recommend Calvin and John at Zenith Home Loans. They guided us through a tricky application and made sure we settled on time. Great communication and support throughout. Five stars.
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Khaled Ahmed
27 May 2026
Trustindex verifies that the original source of the review is Google. Calvin and John made our property purchase happen. Calvin handled the complex loan with multiple guarantors, and John kept the settlement on track. Outstanding team – responsive, professional, and got the job done.
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