Many lenders are now restricting this kind of lending and while interest rates are low, it is the best time to be paying advance repayments on your home and building a financial buffer for the future.

Borrowers with large interest-only home loans may struggle with future interest rate rises and when their interest-only term, switches over to principal plus interest rates.

It is vital that borrowers set up a budget before investing in property and understand their capacity to meet current and future repayments.

Interest only loans are very useful for investors because you can claim the interest as a tax deduction or for buyers who only plan on holding onto the property for a few years and then sell it.

Here are some of the Pros of Interest Only Home Loans:

• Lower monthly repayments
• Can help maximize tax deductions
• Free up cash to invest elsewhere 

What about the Cons?

• Not available from every lender
• Will need to paid off at some point
• Property may depreciate
• Interest rates are historically low anyway
• You could be tempted to spend more than you can afford

Want to keep more of the profit from your Investment Property? Use RealRenta for Free for up to 2 months to manage your property and never pay high Property Management Fees again?!