Having a bit of a dilemma deciding if we should go with P&I or IO for our 2nd IP. From reading the PC forum and podcasts such as The Property Couch, I thought the advice had generally been if you still had a PPOR with an outstanding loan, to go with IO for the IP, and put the principal you would have paid, into the offset of the non deductible PPOR debt, as the negative gearing benefits would effectively drop the IO loan to less than your PPOR rate? We have a current PPOR part 1 yr fixed 2.19% until July 2021, and part variable 2.64% with offset, and have the option of an IP IO 2.69 3 yr or P&I 2.49% 3 yr fixed, variable in the low 3s. I've heard some members here advocate for P&I if cashflow allows given the benefit of serviceability to borrow more in the future and the extra repayments once IO expires unless you successfully refinance or extend the loan back to a 30yr P&I scenario. You also end up paying more interest in the longer term as you don't actually reduce your debt. In my situation, we are probably close to our limit anyway (after borrowing for this 3rd IP we will have an aggregate debt including our PPOR of nearly 6 million), although my wife will probably divest of her IP apartment which has an outstanding 400k. We do plan to see if we can hold our current PPOR and turn this into an IP in 3-5 years, and purchase another PPOR in Sydney's north shore. Arguably if i am using the principal saved with an IO loan to pay down the principal of my non deductible PPOR debt, is this more tax advantageous? If necessary to determine the best strategy, we are a 30yo couple with my wife earning 135k/yr but will be going on mat leave soon and return to the workforce in 9-12 months as part time 3 days/wk, and I earn 500-550k/yr. Thanks, Olly
