IO no more?

property fiannce isnt my strength

I have a few loans with ME bank

I got a letter saying IO will expire soon and will transfer to P &I
its going to hurt my cashflow

is IO not an option?

also, i havent been looking at my rates recently, by Im at aboout 5.5% for many of my loans,

is there a much compareable rate out there?
im happy to renegotiate but dont want to refinance,

Is it worth fixing ? As I don't think rates will go down

 

I suggest you refinance asap if you can. Extend the loan term back to 30 years and get a fresh IP period. IO is slowly becoming very hard to obtain so get it while you can. That rate is very high too.

 

@TMNT

This may help..

What interest rate you have?

 

Assuming you can demonstrate you can still afford the loan, extending the IO period should be possible. ME is one of the few banks that has not (yet) introduced differential pricing for interest only loans.

 

It's an option if you can show the bank that you can service it. They'll likely want a new application for each IO renewal.

Cheers

Jamie

 

We have been discussing these things for more than a year it seems.

Lot of older loans prob around the 5% mark if the loan amount is low, but when rates were at lowest and discounting was going on was best time to re negotiate, re val, or rate lock....

Everything that has been happening for a year or so and is continuing is a move to kill off much of the IO lending, it also has to work out better in the long run to be paying P&I, try and setup to transition, so they do not all go P&I at once.

It may be useful to look at what a loan will cost if put on P&I and then rate locked compared to IO costs.

Giddy up, it is only going to get harder this year.

 

It's interesting - I did some quick calcs on my loans considering the differential between IO and p&i rates, and while P&i costs an additional $X per year, it was saving approx 8-9% of that additional $x in interest. That's before accounting for the fact it's actually paying down the loan and creating equity.
Not a bad return on the extra money out of pocket, so much so that I'm considering flicking some of mine across to p&i early.

 

Can you give an example on how it saves 8-9%?
Cheers

 

Is IO still happening for PPORs at 90% LVR? I know with 80% its fine.

 

It is, but more banks have been pulling back to 80% LVR. NAB pulled back just on Tuesday.

 

Sure,
Assume the following:
$500k mortgage.
Interest only IR = 5.47% (Current CBA SVR)
P&I IR = 5.25% (Current CBA SVR)

Approx Monthly repayments on IO = $2279.17
Approx Monthly repayments on P&I = $2761.02
Total approx interest portion of the P&I payment = $2187.5 (i.e. the 5.25% IR)
Additional Cash required monthly for P&I over IO = $481.85
Difference between interest paid on IO and P&I = $91.67 ($2279.17 - $2187.5)

Therefore for an additional $481.85 cash each month, P&I saves you approximately $91.67 in interest. Or approximately 19% of that additional cash amount. ($91.67 / $481.85)

 

That's a great way to look at it. Cheers

 

Looks like common sense is making a come-back.

 

This should be banned unless the home will become an IP

i.e if your applying for your one and only property, sorry, no way at 90LVR with no other history or complex legit plan.

Say anyone getting the govt grants, FHO grant, a big no way.....

 

I think we will see more of this in the near future

 

for those with $1m it may be feasible to put $1k additional each month?

but for those with $2m loan and if they only left 15 yrs loan term?...this might make a bigger difference if the overall calc..

 

I mean sure, you can adjust the figures however you like.
The earlier example isn't my current situation either - but it's a demonstration of the thinking/calculations so that hopefully people will be able to put their own sums into them and find out for themselves.

 

NAB still offering 2 year fixed investment loan P&I for 3.88%
Interest rates for home lending

considering $1m loan and if you're paying 5.5% already, you could be paying $16k in your principle.

 

And you keep trying to save a few $$$$$$'s by using dodgy handymen.