Benefit of PI vs IO investment loan if no more non-deductible loan?

The IO are now assessed as if they are PI and they cost a bit more than PI. Is there still benefit to keep investment loans on IO if you have no more non-deductible loan?

 

There's still the same benifits, it's just not as much as previously.

 

Yes plenty of benefits such as building up cash to retire earlier.

But there are benefits in paying pi too. Paying off debt is generally a good thing and the serviceability will increase too.

 

@Terry_w I was reading about that family where the mum runs a blog and they bank half of their income. Got me to thinking we should be saving more, then I jumped on the ANZ calculator, and if we doubled our PI mortgage repayment from what we are paying now, PPOR would be paid off in 5 years, if we paid an extra $1100 a month, paid off in 9 years. Certainly is attractive even though it goes against a lot of the advise on here, would be nice to have the piece of mind. Doubling our repayment may prove difficult but I think i could easily find $1100 a month if I tried

 

But you could keep that money in the offset.

Depends on your circumstances. Are you wanting to stop work in the short term? If your passive income is not enough at the moment then an offset account and io may be better as you can build up cash and use it for living expenses tax effectively. However it may cost you a bit of an interest rate hike to stay io

 

Our PPOR is P+I. for the moment I'm working on building up the offset, but then Im going to look at increasing repayments.

 

In most cases, lenders serviceability is better if your existing loans are P&I.

Certainly I/O cash flow is better, but at some point there becomes a very good argument to start paying down debt. P&I is one of the ways to approach that.

 

P&I is incentivised by lenders and regulators now - it is prudent from a macro financial stability perspective to have loans actually amortise (otherwise the system is banking on continual price growth/stability indefinitely).

Re your overall borrowing capacity - while with most lenders serviceability will rise with a P&I setup, your overall portfolio borrowing capacity usually falls. I.e. if its about maxing as much leverage as possible, than you'll go further with I/O payments across the board. This is because there are still lenders a few aggressive lenders that work of your existing debt repayment amount to determine your borrowing capacity (P&I can have a 40% jump in repayment amount).

More importantly for most, there's also cash flow & taxation benefits.