Interest-Only vs Principal & Interest - What’s the Real Difference for Healthcare Workers?

Healthcare Home Loans
Aug 15
2 min read

Choosing the right repayment type could save (or cost) you thousands and it all depends on where you’re at in your career or property journey.

When it comes to repaying your home loan, you typically have two options: interest-only, or principal and interest (P&I). They may sound similar, but they have very different impacts on your cash flow, equity, and long-term goals.

What is Interest-Only?

For a set period (usually 1–5 years), you only pay the interest on your loan, not the loan amount itself (known as the principal).

Pros:

Lower monthly repayments in the short term
Frees up cash for other priorities: renovations, maternity leave, or investment plans
Can align well with those in training, on contracts, or early in their career

What is Principal & Interest (P&I)?

You pay both the interest and a portion of your actual loan. This means higher repayments, but your loan balance gradually decreases over time.

Pros:

You steadily build equity in your home
Long-term interest cost is significantly lower
Generally gives you access to lower interest rates from lenders

Healthcare Insight:

Healthcare professionals often move through unique life stages from long shifts and locum work to maternity leave or postgraduate study. Interest-only loans can provide valuable breathing room during these seasons.

Banks also allow interest-only periods during construction loans, dual applications with split income, or property investment strategies for healthcare workers.

Some lenders understand the rhythm of your income and are more likely to approve interest-only repayments, especially where the loan-to-value ratio (LVR) is strong and your profession is viewed as low-risk.

Real-Life Example:

Josh and Eleni, both allied health professionals, were renovating their first home. Their broker suggested an interest-only period for two years to maximise their cash flow during construction. Once the work was complete, they seamlessly transitioned back to P&I and began reducing their loan balance faster.

What to Ask Your Broker:

Can I switch from interest-only to P&I later (or vice versa)?
How much more will I pay each month if I go straight to P&I?
Is an interest-only period right for my life stage (maternity leave, internship, early career)?
Will my lender allow interest-only if I’m investing or building?

Bottom Line: One option isn’t better than the other, it’s about matching the repayment type to your season of life, financial goals, and cash flow needs. With the right structure and advice, you can create a plan that works now and into the future.