Home/Investment Home Loan - Interest Only Switching Fact Sheet

Home/Investment Home Loan ? Interest Only Switching Fact Sheet

You should read the Switching Terms and Conditions together with the Consumer Mortgage Lending Products Terms and Conditions and your Consumer Contract Schedule before requesting to switch your loan payments to Interest Only.

Interest Only payments Interest only periods

A Home/Investment Home Loan repayment typically consists of two parts

? The Principal component ? the amount you borrowed (loan balance)

? The Interest component ? the interest the bank charges on your outstanding balance

An Interest Only Home/Investment Home Loan is where you can choose your minimum repayments to only cover interest charges on your loan for an agreed period of time. This means that your loan balance does not reduce during an Interest Only period as you are not making any Principal repayments.

Interest rates for Interest Only home loans tend to be higher than Principal and Interest home loans.

Benefits

? Lower payments during the Interest Only period than if paying Principal and Interest

Considerations

? Higher Principal and Interest repayments after the Interest Only period ends

? Higher interest rates than Principal and Interest

? Pay more interest over the life of the loan

? No equity building during Interest Only period as Principal is not reducing

? Potential tax considerations if the loan is an Investment Home Loan

You can switch between Principal and Interest repayment options during the life of your loan, however there are limits on how long you can have Interest Only periods for:

? Maximum Interest Only period at any one time is 5 years for all home loans

? Total Interest Only periods allowed during the life of the loan is 5 years for Owner Occupied Home Loans and 10 years for Investment Home Loans

? Interest Only is unavailable in the last 5 years of your loan term

Switching process

Types of Interest Only switches

Switching from Principal and Interest to Interest Only

A Switching application will be required for this type of switch and we will need to assess your serviceability.

Either contact our Switching Team on 1300 057 072 between 8AM-6PM, Monday ? Friday (Sydney/Melbourne time) or contact your Relationship Manager directly.

Extending your existing Interest Only period

If you are eligible to extend your Interest Only period, complete a Loan Switching Request form and return to your local Branch or your Broker. This form is available at your nearest Branch and online on the CommBank website.

Note: We will assess your request for an extension and in some instances may require an application to assess your serviceability.

Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 Australian credit licence number 234945 006-636 191018 Page 1 of 2

What will I need to provide?

How long will this process take?

As your Interest Only period is for a short time, eventually you will need to pay off your loan balance. When your Interest Only period expires, your repayments will change to Principal and Interest. This means your repayments will increase and you will start to pay off your loan balance. Switching to Interest Only is only permitted where we are satisfied you can afford the increased Principal and Interest repayments at the expiry of the Interest Only period without undue hardship. An assessment is required to assess the suitability of the Switching request.

To get your Switching application underway and provide you with a decision as quickly as possible we will need to verify your financial situation.

Your earnings:

Salary/wages/contract income

? Your most recent payslip or bank statement showing 3 months of salary credits

Self-employed

? Most recent year's personal and business tax returns including financial statements

? Most recent ATO Notice of Assessment

Rental income

? Statement or letter from the managing/real estate agent or current lease agreement

Government income

? Bank statement showing 3 months of payment credits or letter from Centrelink confirming the benefit(s) amount

Your borrowings

? 1 month statement for your Home/Investment Home loan, Line of Credit, Personal Loans, Credit Cards or other fixed repayment loans not held with CommBank

A signed Loan Switching Request form is required where the loan has

? More than one borrower (and Method of Operation is All to Sign)

? Any non-personal borrower(s)

? Any loans with a guarantor(s)

Other important details

? An estimate of your monthly living expenses e.g. food, transport, clothing, utilities, education and health care. No documentation is required.

A completed Loan Switching Request form signed by all parties of the loan.

The Switching assessment will take approximately 30 minutes to complete over the phone.

It will take approximately 2-5 business days to process your application once all documentation required is provided. Some requests may take additional time where a more in-depth assessment is required.

It will take approximately 2-5 business days to process your Switching request from when your form is submitted.

Things you need to know ? This fact sheet has been prepared by the Commonwealth Bank without considering your individual objectives, financial situation or needs. You should consider its

appropriateness to your circumstances and consider seeking professional advice relevant to your individual needs before making a decision based on this information. You should also obtain professional, financial and taxation advice specific to your individual needs. ? Applications are subject to the Bank's normal credit approval. ? This fact sheet is subject to change without notice.

Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 Australian credit licence number 234945 006-636 191018 Page 2 of 2

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