Convert PPOR IO to P&I?

Im currently paying 4.42% with CBA IO , period ends 06/2020. PPOR
Should I be changing this to 3.87% P&I (27 years left)?

The property may become an IP in the future (unsure how many years, but definitely over 1 year).
I guess it would convert to P&I anyway in a year's time.

Could I get a better P&I rate with CBA?

 

The tax deductions you'll miss out on by paying off some principal over the next 12 months are going to be negligible. Even if you had 5 years to go, the tax deductions not enjoyed are relatively small compared to the extra cost of the loan by paying IO when you take the full life of the loan into account.

Essentially I don't think that tax deductions are a good reason to take an IO loan.

I've come to the conclusion that there needs to be a better reason to take an IO loan. You will save a lot of cash flow in the first few years, but if you don't do anything useful with it, then it's a waste of money. A good use of that extra cash flow would be to direct it to pay off non-deductible debt, or to free up money for additional investment.

If you don't do anything useful with the spare cash flow during an IO period, you're wasting money and opportunity. You'd be better off paying P&I.

 

If you do decide to move out and keep it, realistically would you be able to buy something else yet to keep this? If you can't service anyway or qualify for a loan then you might have no choice but to sell it. If that would be the case then no point in going IO if paying more interest.

Another option may be to borrow a bit extra and pay PI but use the extra amount to pay the principal of the loan. So your overall loan balance remains the same, but your interest rate drops. Seek tax advice on this strategy.