Do I bite the bullet and pay P&I on IP?

Hi Everyone

The ANZ loan will expire soon on our IP which has been IO since we purchased it. 2013
Have a PPOR of $$282000 left to pay with an offset.

Would like another IO loan for the I P
Could you please suggest finance banking or building societies re IO loans. $270000 left to pay or do we look at the best P& I loans on offer.
Thanks

 

A couple things you'll need to consider:

• how will P&I on your existing IP loan interact with your borrowing capacity going forward for purchasing/refinancing in the future
• whether you have the borrowing capacity to support refinancing the loan - I get a lot of investors talk about refinancing their loans only to find out they do not have the capacity to actually do this as their borrowing capacity has significantly eroded post APRA intervention
• LVR - no point refinancing if you're over 80% LVR/can't reduce the LVR accordingly
• tax and investment strategy considerations

Overall if borrowing capacity isn't a concern theres a spread of ~0.2-0.3% with some lenders between P&I/IO - so not a huge saving there. If you can come up with a sufficient reason to pay this premium for IO it may be well worth it, otherwise flick it over to P&I. ANZ is OK but not the market leader on P&I investment rates.

Refinancing internally/externally can also factor in a 30 year term reset which will reduce the cash flow hit a touch by spreading the repayments over the full 30 years instead of the remaining 25 on your existing facility.

Speak with an investment focused broker about your specific circumstances and they can help guide you to the best option which fits your short, medium and long term needs.

 

Back peddle a bit. Don't worry about paying p&i or refinancing for a minute. Think what this is doing to the wider market and how long these restrictions will stay in place. If this property is negatively geared or has a lot of equity is there a better place for you to be putting your money?

 

Corey's summarised it well.

Probably begins with asking yourself what your looking to do short/medium term and working from there.

It may involve asking ANZ whether they'll extend the IO period to begin with (if thats what you want) or renegotaite rates/terms on existing loan to work out their offer.

Measure it up against alternatives that you're eligible for. Eligibility may be key here, by the tone of your OP it may be non bank servicing required. Rates are LVR dependent, if low LVRish, you may get a rate discount and more IO time here to allocate to PPOR debt reduction.

 

Hi

Thank you very much for all the advice will approach the ANZ first to see if they will extend IO loan

 

Horses for courses and depends on what you want to achieve, income, your goals etc.. Also tax considerations in play here as well.
Unfortunately the answer is it will depend on your circumstances