Convert PPOR from P&I to IO?

Discussion in 'Loans & Mortgage Brokers' started by lolm8, 24th May, 2020.

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  1. lolm8

    lolm8 New Member

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    24th May, 2020
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    Adelaide
    Hopefully I've posted this in the right section otherwise apologies in advance. My current situation is:

    PPOR - current P&I Loan balance $410k with an offset account with same amount in it. i.e. paying off 100% Principal at the moment.

    IP (Previously our PPOR and refinanced to 80% LVR 2yrs ago) - current I/O balance (2 years into a 5 year I/O period) - $400k with approx. $100k in offset account with all surplus funds being deposited into this account. Current rate of savings in the order of approx. $70k/pa expected increase in offset balance.

    Don't really have any long term strategy at present and gut feel is we would sell our PPOR in the future (say within 5 years) to buy another PPOR rather than converting to another IP. Or if we kept it as an IP then it would also make sense to convert now to I/O (same as what we did with our first PPOR).

    Given we're paying 100% principal off, would it be prudent to look into converting this loan to I/O as well and increasing the rate we build up the IP loan (say approx. and additional $20k/pa?). What would the cons be to this outside of reducing my tax deductions?
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Good work :)

    One thing will be slightly higher rates, and a new loan app required with most lenders

    ta
    rolf
     
    San2018 likes this.
  3. San2018

    San2018 Well-Known Member

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    Sydney
    I am in a similar situation @Rolf Latham . With Westpac, is it going to be a new loan applciation.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    While fully offset it doesn't matter what the rate is as there will be no interest. But just think it might be that the offset money or used or moved and then the rate can become important. But it is generally easy to get back to PI from IO rather than the other way around.