Interest only has its place.

The first reason is maximising deductibility. If the loan is on an investment property, paying interest only keeps the deductible balance steady and frees cashflow for principal repayments on a non-deductible owner-occupier loan. The second is short-term cashflow relief while you save a deposit for the next property. The third is a defined stage of life, such as construction, maternity leave or a business transition, where lower minimum payments ease the pressure for a while.

The trap is using IO as a permanent setting on every loan. IO eventually reverts to P&I, usually after 5 years, and the P&I payment is calculated on the original loan amount over the shorter remaining term. If you haven't planned for that, the jump in repayments can be a shock. We model the reversion payment upfront so you know what's coming.