P&I or IO

Discussion in 'Loans & Mortgage Brokers' started by Lawrence Barnes, 23rd Jan, 2018.

Join Australia's most dynamic and respected property investment community
Tags:
Page 3 of 3
  1. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,650
    Location:
    Gold Coast (Australia Wide)
    Yep. We have dozens of clients doing and killing same as part of an active strategy, many of them managed by our DR specialist.

    While not hard to diy, most don't have the patience or time to learn the bits needed to make it work most efficiently.

    Lack of understanding by lenders as to the benefit and power of the strange is a big issue with some lenders like WBC and suncrap using the wet blanket approach for new business.

    While some lenders lose here others are stepping up .

    Interesting times

    Ta

    Rolf
     
    Rolf Latham, 31st Jan, 2018
    #41
  2. NHG

    NHG Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    644
    Location:
    Sydney NSW
    Depends on your position.

    Scenario:
    I have an IO 5yr/30yr loan with CBA.
    Loan is $420k.
    Repayment $2100/month

    Change IO to P&I at yr 25 (or earlier)
    Repayment $2300/month
    However I am paying off say at least $4k off my loan in the first year, and snowballs down.

    So I pay and extra $2400 in repayments for the first year, yet am able to reduce my debt by at least $4k.

    So it's actually in my best interest (soooo many variables this will impact, borrowing capacity, ability to leverage, etc). Worth talking to the bank/mortgage broker to see if it's a good move.

    I have 2 loans I have maxed at 80% LVR. I am currently talking to the bank to turn them into P&I for the above reason. I still have 4 yrs left before they changed, however it's in my best interest to change it now.
     
    NHG, 13th Jun, 2018
    #42
  3. Athikalaka

    Athikalaka Well-Known Member

    Joined:
    1st Jan, 2016
    Posts:
    188
    Location:
    AU
    All my loans are currently P&I for the past 9 months and I've been measuring our lifestyle. Thankfully everything is fine but I do have a tax variation in place for one of us. I've worked out that if we both didn't have tax variation in place, we would still be fine.

    I mentioned in another thread that I'm considering to move one of my loans back to IO because I prefer to have a cash buffer sitting in my offset rather than paying down the loan immediately. A bit of personal security and opening up options to where I wish to put my funds. The biggest difference is the offset. Switching back to IO will mean my cashflow will increase by $1000 each month. If I'm diligent enough to save this and create a larger offset buffer, if I'm forced to go back to P&I, that will offset most of the interest and the principal will be paid down faster.
     
    Athikalaka, 13th Jun, 2018
    #43
Page 3 of 3
Join Washington Brown's Tax Agent Referral Program