What you need to know…
It is important to understand that all banks have varying policy when it comes to wanting to extend or roll over the interest only (I/O) term, some slightly varying and some dramatically. It is also important to know that policies change on a regular basis.
When initiating the loan, I generally try to set with a 10 year I/O term if that is available; not many allow this and five years is generally the maximum. Approximately 6 weeks prior to expiration of the I/O term is a great time to have your finances reviewed by your broker.
With some lenders it is simply a phone call and you can roll over the loan to another 5 years I/O. This is normally the case if you have not requested this before i.e. first time rolling over. Various lenders have a variations form that needs to be completed, may want some minor supporting documentation and some will charge a small fee.
Finally there are a number of banks that will require full assessment to extent the I/O term; that is a full application is required. There are some extenuating factors that can affect the process required. For instance if the loan was mortgage insured then the bank that normally requires just a phone call will require full assessment instead.
Just when you think that you know all of the lenders’ various policies, niches and quirks it changes! Bottom line, be sure to have things reviewed by your broker to ensure the best possible outcome and ensure your interests are looked after ahead of the banks.