Reviewing your home loan

Interest-only period ending? Your options and how much repayments will rise

What happens when an interest-only period ends, a worked example of the repayment jump, and the options to check with your lender before the switch to principal and interest.

Updated: 6 November 2026
Read time: 8 min read
Prepared by: emoney content team

Key checks before you decide

Prepared by emoney content team. Updated 6 November 2026. Sources are listed below.

Find the exact date your interest-only period ends and your remaining loan term.
Ask your lender what your principal and interest repayment and rate will be from that date.
Test the new repayment against your household budget, with room for a higher rate.
If you want another interest-only period or a new loan, start the conversation months before the end date.

In this guide8 sections

What changes when the interest-only period ends Worked example: how much a $600,000 repayment can rise Your options before the switch Asking your lender to extend interest-only Refinancing, restructuring or selling Timeline checklist: six months, three months and one month before Questions to ask your lender If the new repayment is not affordable

What changes when the interest-only period ends

During an interest-only period you pay the interest but do not reduce the amount you borrowed. When the period ends, the loan generally changes to principal and interest repayments, and the full balance must be repaid over the years left on the loan.

That last point is why the jump surprises people. On a 30-year loan with five years of interest-only, the whole balance is repaid over the remaining 25 years, not 30. CommBank's interest-only page explains the same effect: principal and interest repayments are calculated over the period remaining, so they are higher than they would have been without the interest-only period.

Your interest rate can also change at the switch. In August 2026, RBA data show average rates on outstanding interest-only loans were higher than on principal and interest loans, for both owner-occupiers and investors. Your lender sets the rate that applies to your loan, so ask for the actual figure rather than assuming it.

ASIC MoneySmart notes that the change can be a shock and suggests checking when your repayments will go up and by how much. If your loan allows extra repayments, it also suggests working up to the higher amount before the switch.

Example

Worked example: how much a $600,000 repayment can rise

This example uses a $600,000 loan with a 30-year term, a five-year interest-only period and an illustrative rate of 6.2% p.a. The rate is not an offer or a forecast. It matches the RBA's average rate on outstanding owner-occupier principal and interest loans for August 2026. That average predates the RBA's 0.25 percentage point cash rate rise on 30 September 2026, so current rates may be higher.

Figures are monthly, rounded to the nearest dollar, and assume the rate stays the same, no extra repayments and no fees. Your lender's calculation may differ slightly.

On these assumptions, the repayment rises by about $839 a month, or 27%, when the loan moves to principal and interest over 25 years. That is also about $265 a month more than a 30-year principal and interest loan would have cost from the start, because the same balance is repaid over five fewer years.

Over the full 30 years, the interest-only path costs about $767,848 in interest, compared with about $722,933 for principal and interest from day one. That is roughly $44,900 more at the same rate. After five years of principal and interest repayments the balance would be about $559,688, while the interest-only borrower still owes $600,000.

The rate can soften or sharpen the jump. If the interest-only rate had been 6.9% p.a. (the RBA's August 2026 average for outstanding owner-occupier interest-only loans) and the new rate was 6.2% p.a., the repayment would move from $3,450 to $3,939, an increase of about $489 or 14%.

To estimate your own figure, enter your current balance, your expected new rate and the years left on the loan as a principal and interest loan in the home loan repayment calculator. MoneySmart's interest-only mortgage calculator also shows repayments before and after an interest-only period.

Scenario (monthly, $600,000)	Repayment	Change from $3,100 interest-only
Interest-only, years 1 to 5, at 6.2% p.a.	$3,100	Current repayment
Principal and interest over the remaining 25 years, at 6.2% p.a.	$3,939	+$839 (27%)
Principal and interest over the remaining 25 years, at 7.2% p.a.	$4,318	+$1,218 (39%)
For contrast: principal and interest over 30 years from the start, at 6.2% p.a.	$3,675	+$575 (19%)

Your options before the switch

There are five main paths. Each has costs and conditions, and none is right for everyone. The right choice depends on your budget, your plans for the property and what a lender will approve.

If you were paying interest-only to keep repayments low for a set period, the switch to principal and interest may simply be the planned next step. If you chose interest-only for investment or cash-flow reasons, the decision may be closer. Our principal and interest vs interest-only page explains how the two repayment types compare.

Option	What it involves	What to check
Move to principal and interest and budget for it	Let the loan switch as scheduled and plan for the higher repayment	The exact new repayment and rate, and whether your budget has room if rates rise
Ask your current lender for a further interest-only period	A new request, assessed under the lender's current policy	Lifetime interest-only limits, income and expense evidence, and any valuation or fee
Refinance to another lender	Apply for a new loan, which means qualifying again	Discharge, application and valuation costs, LMI if your equity is below 20%, and the new loan term
Restructure or sell	Change how the loan is set up, or sell the property and repay the loan	Whether a longer term means more total interest, and selling costs against the property's current value
Ask for hardship assistance	A change to repayments if you cannot meet them	How long the change lasts and how interest is charged during it

Watch out

Asking your lender to extend interest-only

A further interest-only period is not automatic. Lenders generally treat it as a new request and may assess your income, expenses and debts under their current policy. Lifetime limits also apply, and they differ between lenders and between owner-occupier and investment loans.

Here is how three lenders describe their own policy, as published on their websites on 2 November 2026. These are examples only. They do not describe every lender, and each lender can change its policy.

CommBank says the maximum interest-only period at any one time is five years for all its home loans. Its total across the life of a loan is five years for owner-occupiers and 15 years for investors, and interest-only is not available in the last five years of the loan term. CommBank says it may need to assess your financial circumstances to approve a new interest-only period.

Westpac says owner-occupiers can have interest-only repayments for up to five years over the life of the loan, and investment loans up to 15 years, subject to approval and eligibility criteria. If you have not used the maximum, you may be able to apply for an extension. Westpac says to start well before the expiry date and to provide details of income, expenses and liabilities.

ME Bank says owner-occupied loans can have interest-only repayments for up to five years in total, and investor loans up to 10 years in total, subject to credit approval. It says a request is subject to assessment and approval, a property valuation may be required, and a valuation fee may apply.

Investors often weigh the tax position when deciding whether to stay on interest-only. Whether and how much interest you can claim is a tax matter that depends on how the loan was used. The ATO explains the general rules for rental property interest. Speak with a registered tax agent or the ATO about your situation. This guide does not give tax advice.

Refinancing, restructuring or selling

Refinancing means applying for a new loan. The new lender will assess your income, expenses, debts and property under its own policy, and the new loan may start on interest-only or principal and interest terms depending on what you apply for and what is approved.

Westpac's interest-only page suggests that a borrower who has reached the interest-only time limit could close out the current loan and apply for a new one. That is one lender's description, and a new application can still be declined.

MoneySmart's guidance on switching home loans says to compare fees and charges, check whether lenders mortgage insurance would apply if you have less than 20% equity, and work out how long it would take to recover the cost of switching. It also suggests asking for a loan with a similar length to your current one, because a longer term means more interest.

Restructuring can mean changing the loan term or how the loan is split. A longer term lowers the monthly repayment but increases the total interest paid over the life of the loan. Any change needs your lender's approval.

Selling is a bigger step. MoneySmart notes that if the property has not increased in value during the interest-only period, you will not have built up equity. Get the property's likely sale price, selling costs and the loan payout figure before treating a sale as the answer.

Next step

Want a broker to check this against your situation?

Share the loan goal, timing and a few key details. An emoney broker can then pick up the enquiry with the relevant context.Review my loan before the switch

Timeline checklist: six months, three months and one month before

Starting early gives you time to compare options and, if you need it, to apply for a new arrangement before the switch date. A lender assessment takes time, and documents can take longer to gather than expected.

When	What to do
Six months before	Confirm the end date and remaining term. Ask your lender for the expected principal and interest repayment. Build a budget that includes it.
Six months before (or earlier)	If your loan allows extra repayments, start paying part of the increase now. MoneySmart's example: if repayments will go up by $1,200 a month in a year's time, start paying $100 more each month now.
Three months before	Decide whether to ask for a further interest-only period or compare other lenders. Gather payslips, tax returns, expense records and loan statements.
Three months before	If refinancing, get a full list of switching costs and check whether lenders mortgage insurance could apply.
One month before	Confirm in writing what happens on the end date: the new repayment, the rate, the first payment date and how it will be debited.
One month before	If you think you cannot meet the new repayment, contact your lender's hardship team now rather than after a missed payment.

Questions to ask your lender

Ask for answers in writing where you can, so you can compare them with other options.

What is the exact date my interest-only period ends?
What will my principal and interest repayment and interest rate be from that date?
How many years of interest-only have I used, and what is the maximum for my loan type?
What do you need from me to assess a further interest-only period, and is a valuation or fee involved?
Can I make extra repayments or use an offset account now, and are there limits?
What would it cost to discharge this loan if I refinance?
If I am worried about affording the new repayment, who should I speak to?

Watch out

If the new repayment is not affordable

Talk to your lender early. MoneySmart says the earlier you get help, the more options you will have. A lender may be able to change the terms of your loan, or temporarily pause or reduce your repayments. This is called a hardship variation.

MoneySmart says to contact your lender's hardship team, explain why you are having difficulty, how long you expect it to last and what you can afford. Your lender must write to you within 21 days with the outcome. If it asks you for more information, it must respond within 21 days of receiving it. If it refuses, it must give the reason and tell you how to complain to AFCA.

If you are not happy with the response, use the lender's internal dispute resolution process. If you still cannot reach agreement, you can complain to the Australian Financial Complaints Authority (AFCA), which offers free, independent dispute resolution. A free financial counsellor can also help you make a plan. Call the National Debt Helpline on 1800 007 007.

General information only: this guide does not consider your objectives, financial situation or needs, and is not a recommendation about a particular loan.

Calculator next step

Home loan repayment calculator

Test whether a loan amount, rate, term, and repayment type feel workable before taking the numbers further.

Best for: Checking repayment comfort across purchase, refinance, or rate-change scenarios.
What it calculates: Weekly, fortnightly, or monthly repayments from loan amount, rate, term, frequency, and repayment type.

A broker still needs to check fees, comparison rates, offset or redraw settings, loan structure, and policy fit.

Open Repayments

Sources used

Interest-only home loans
ASIC MoneySmartofficial sourceChecked 2 November 2026
Interest-only mortgage calculator
ASIC MoneySmartofficial sourceChecked 2 November 2026
Problems paying your mortgage
ASIC MoneySmartofficial sourceChecked 2 November 2026
Switching home loans
ASIC MoneySmartofficial sourceChecked 2 November 2026
Statistical tables: Housing Lending Rates (F6)
Reserve Bank of Australiaofficial sourceChecked 2 November 2026
Interest expenses for rental properties
Australian Taxation Officeofficial sourceChecked 2 November 2026
Interest Only home loans
CommBankindustry sourceChecked 2 November 2026
Interest-only home loans
Westpacindustry sourceChecked 2 November 2026
What are interest-only repayments?
Westpacindustry sourceChecked 2 November 2026
Interest-only home loans
ME Bankindustry sourceChecked 2 November 2026
Principal and interest vs interest-only
emoney Home Loansemoney sourceChecked 2 November 2026

General information only

This guide is general information and does not take into account your objectives, financial situation, or needs. A broker can review your circumstances before any recommendation.

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