Debt is bad. That’s is the mentality of most of us that grew up in a typical Australian household. However, there is a distinct difference between good debt and bad debt the reason I bring this up is because I want to highlight that even though property (with good asset selection) is considered good debt, there are still ways that the loan structure can be good and bad.

Now I do need to highlight that I am not a qualified financial planner or accountant but I’ve worked through this with logical reason and crunched the numbers for my own personal situation to provide to you my opinion on how I see Principal & Interest Versus Interest Only Loans.

Principle & Interest (P&I)


  • ‘Forced’ debt repayment
  • Feel good about ‘paying off the debt’


  • Reduces cash flow significantly
  • Financially less liquid than interest Only
  • Leverage off the paid principal loan only up to 80%

Interest Only



  • Requires a lot more discipline
  • Not all banks and financial institutions offer offset accounts
  • Not all institutions offer Interest Only
  • Interest Only loans run for a maximum of 5 years (generally)

In Summary

Every person’s situation is different, there is no such thing as one size fits all so your situation needs to be assessed rigorously to ascertain what the best option is for you and your family.

If you would like to talk to some one about your particular situation, drop us a line and we can have a chat


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