Fixed rates, IO and P&I

A question for some of the brokers.....

With all the turning off of IO extensions etc, has anyone tried, or aware of if you can

1 Change a loan that is IO that has a period left, to P&I, but be able to revert to the IO remaining period, an IO holiday if you like.

2 I think this one no one would do as is possibly breaking the loan, but essential same as above, but when you have a fixed rate IO

And happy Easter to all

 

No.

 

As you know I'm not a broker but :
1- yes. My bank will do this - for now, anyway. I have done this.
2 - asking a bit much I think. What about break costs. Once fixed is broken, you won't get it back unfortunately.

 

That is what I suspected, but you never know, this would be a good thing for investors, to have the IO period to be used at the borrowers direction.

 

Oh, ok, what bank ?

re 2, I was in 2 minds, you would not be breaking the fixed, you would just be paying some principal, but it is probably too hard once the fixed period starts, I am not privvy to all the mechanics behind the scenes. Again, would be a good product option.

 

I'm reading question 1 in the following context:

* You have a 5 year interest only period.
* After 1 year, you decide to go to P&I repayments.
* 2 years later you decide you want to have another 4 years interest only (the balance of the originally approved 5 years IO).

I'm not aware of any lender that would recognise the balance of the original 5 year IO approval. There are a couple of lenders that switch to IO fairly easily (CBA, Westpac) within certain parameters. Outside of this a formal application would be required.

 

Yeah that's what I did.
Teachers Mutual Bank.
I also timed my last break costs so that they came to nothing. But I don't want to tell everyone and ruin it.

 

Fixed is a discrete package, isn't it. Once you break it, that's it.
Edit: Understand now. Actually, I think it's possible to pay a bit off the principle - I know, it's weird. I found out accidentally. I'm always asking questions. You should ask. Again, it's possible with TMBank.
This is why it has once again won the most ethical bank award. Why would anyone go with those other buzzards?
On the other hand, the IO option is a condition that the bank can decide on pending certain circumstances. I had an IO loan for a year, didn't like it so went P&I - which even then meant a lower interest rate in 2012 - then fixed it for 3 years, then broke it about 10 months before end of term when I was retrenched to go back to IO - without break costs because of timing.
I have checked: I still have 3 and a bit years to go with this term and may be able to extend another 5 years when I get to the end. I prefer P&I but not sure at this point how long I'll be working where I am right now.
Flexibility required.

 

I think most will allow payments off, but they set the amount allowed in a period, I can't say exactly because that does not interest me as that would still be IO.

And yes, what I am talking about would be more flexible, and only comes to mind now many (probably all) will go to full application for IO renewal. Anyway, no one offers this it seems

 

Yes, that was what was being asked.

 

Most lenders won't allow this. In practice, you could do something similar with some lenders for now (i.e. swap to P&I and swap back to I/O later). Its not really treated as a break from a 5 year I.O that you turn on and off.

Also re the heading - some lenders don't have separate fixed rate pricing for P&I and I/O yet. I suspect with APRAs 30% threshold, this will change as the incentives are a bit out of whack, which would push up demand for fixed I.O products.

 

Hi Redom, yeah, was asking due to the trend of moving to full assessment to renew IO periods.

re the second part, I am not going to talk about it