Investment P&I or IO

Hi all,

Does anyone have an excel or some formula that can be used to work out whether I would be better off on P and I or IO post tax deductions etc.

I want it to be able to input variables such as tax bracket or total tax payable per year, rates for p&i and IO etc (what ever other variables are required).

 

No

 

asked for a similar thing too, you'll need to code/excel up your own.

 

Thing is the difference is in how you use the extra and how much debt you apply to this.

 

Often its not about the numbers per se - even if the IO rates were the same as P&I rates it may be better to go P&I. One of the concepts of IO investing is that you save the principle repayments in the offset linked to the non deductible debt.

However, what tends to happen is people build up a good buffer in their offset but will also spend the money. Some need to go P&I as forces them to reduce their debts.

 

I've sent a PM with a spreadsheet that might help. There is a bit more to it than the numbers though. IO is really about preserving cash flow, but it won't save you money in the long run. The reason you want to use IO repayments is often as important as the numbers.

 

Hi, could you please PM me the spreadsheet too.

 

Done.

 

may I also request a copy of the spreadsheet.

 

My view is that if you are diligent in not touching all those savings going into the offset account attached to that IO-investor mortgage, then in this low low interest rate environment you can be better off with IO for 5 years providing you save hard and plump up that offset account heavily. If you have higher yield and higher income in general and not a lot of significant expenses upcoming over the 5 years ahead, I think you can get ahead.

That way, in year #6 when it flicks to P&I you'll slowly eat into the principal out of funds you contribute from the offset account. If you're able to continue pumping more savings into the offset still, during years 6 and 7, generally you'll remain ahead.