IO Period finishing up soon

Hi all,

I've just been advised that my interest only period on my PPOR home loan is due to expire in a couple of months.

Currently this loan is effectively paid off (amount in offset is the same as the loan).
If I were to allow it to expire and transition across to a P&I loan, would I just find that each month the balance of the offset will reduce a little to cover the principal component, and the loan would reduce by an equal amount?

I'd rather not pay the loan out, because I may decide in the near future to lease the property out and would like to be able to make deduction on the interest payment if I move the offset cash elsewhere.

Would rather not go through the process of a loan application to refinance or extend the IO period again.

Thanks

 

Yep - you can just let it go to P&I, and the offset will gradually reduce as the outstanding balance reduces. It will just be principle payments for the whole lot, so the balance will reduce quite quickly.

 

Correct

if you want to have another IO term, very likely you will need to apply a new loan.

 

Is it possible to ask the bank to recalculate payments for the remaining term? Since all of the payment will go towards principle, they will end up paying the loan off before the end of the loan term.

This seems tedious but an option to call the bank every year and have payments adjusted so that the loan is not paid off as quickly. Haven't done the maths to see how much of an effect this has.

 

You can always ask - i think cba do this if the funds are in redraw but each lender will have different rules about this.

 

Seems more trouble than a new app...

 

ANZ will do it,
Westpac won't - supposedly.

 

Agree, but OP didn't elaborate on why he didn't want to deal with a new app so exploring what all his options are to minimise paying out the loan