CBA says its OK to sing I owe I owe, but no more IO on > 80 % is my woe

I would be looking at when your other IP's are coming off IO. Ideally, you want a bit of a spread so the shock is reduced when they start moving to P&I. Also depends on the size of the loan - if it's small, the additional hit to cash-flow is relatively small so neither here nor there, but if it's a $1M loan, you'll want to be a bit more strategic about it.

 

Yes Jess/Rolf ti million. Sorry its 2 loans not one potentially. And I'm talking fixed rates here.

 

Any non deductible debt?

 

During the first 5 year period your cash flow is about 20% - 25% better off if you select I/O, but for the remaining 25 years it's about 15% worse because you're now amatorising over 25 years instead of 30.

The tax disadvantage of paying off that principal in the first five years is fairly negligible even if you're on the highest tax rate.

Additionally people should not assume that they can roll the I/O period over after that initial period. There's a good chance that in the future even refinancing to a different lender won't allow you to reset the I/O clock.

I/O loans are a short term benefit with a long term cost. If you really need that short term benefit, then I/O is fine, otherwise I'm growing increasingly warmer to P&I from day one. If you don't have any non-deductible debt, this almost becomes a no-brainer.

 

None ie all deductible

 

Well, I've perhaps incorrectly assumed (for now anyway, given its all the rage), that I could stay interest only ad infinitum because believe it or not - I've been an investor for 20 yrs, have quite a few IP's and a large loan balance and I've NEVER been forced to go P&I...ever.

Call me an optimist but my gut tells me that these credit squeeze measures are a short-medium term thing. Normality will prevail at some point - not sure what the catalyst will be...perhaps a global slowdown, unemployment rising etc. ie when the Govt starts pleading for more economic activity, we'll see a lot of these 'policy' measures relaxed.

 

My own experience as an investor mirrors yours, but it's a brave new world in the lending market. I don't think we can make the same assumptions as we used too.

 

AMP is todays news...

PPOR P&I variable rates = no change .
PPOR P&I fixed rates down by 0.10%.
PPOR I/O variable rates up by 0.28%
PPOR and INV I/O fixed rates up by 0.20%

I/O lending against PPOR securities ( including Master Limit ) reduced to 80% LVR

Lending against INV securities remains unchanged at 70% LVR

 

In that case paying PI would be worth considerating as you are:
a) getting a lower rate so paying less interest, and
b) paying off debt
c) improving serviceability.

but the question to ask is which loan should you be paying PI on? Older loans will have shorter terms so higher repayments.

 

Tx

Tx Terry. For now, these 2 are potentially the only ones I'm having a dilemma about. The rest are interest only at decent rates (most fixed) and I'm happy to keep them that way for as long as possible.

 

Hope for the best, prepare for the worst. I have set everything up so it will tick along nicely at P&I if necessary. It has taken around 2 years.

 

I wish I could double like...nay...triple like this post. CBA are predatory IMO and I have nothing but disdain for their business practices

 

100% agree with this too many newbies cant see this

 

Euro - what do you consider a cash cow?

 

He's probably search for on google image 'cash cows'

 

do we see the loan term when refinancing from Lender1 to Lender2 that it will not reset to 30 year term? Say you have 10 year loan term left with L1. When you refinance to L2, you would think there's no problem going 30 year even P&I... would APRA step in for this?

 

They already do with ppor loans. If the term of the new loan ends after proposed retirement age some lenders make it very difficult.

For most lenders, for borrowers with a bit of super it's still possible, especially for investment property's (rent grows and continues after retirement) but anythings possible in the future.

 

On a positive note we still have until the 10th of June to stay IO 80+ although at a premium

I was thinking shares in them may be a good option but maybe hold off for now.

The amount of people I have told to do this to be met with blank stares. Nek minute I will be getting emails about how they need to get that equity I told them about 2 years ago but the ship may have already sailed.

 

I doubt it, at this stage. As it is lenders are already conservative when it comes to older people and will reduce their loan terms to something reasonable. They also want an exit strategy in place, which is fair enough.