INTEREST ONLY LOANS
Interest only loans cover only the interest due on the total amount you borrowed. They have an interest only period of between 5 and 10 years. You may want to purchase an investment property where you would like to keep the monthly repayments to a minimum amount. This helps in paying the mortgage from the rental income received and minimises the reliance on negative gearing.
Interest only loans are not recommended for purchasing of established owner-occupied properties. They are however useful to fund the purchase of the land and the construction of the dwelling. After the construction phase, the interest rate switches to principal and interest. Keep in mind, during the interest-only period, you do not pay anything from the loan principle.