Hi all, My partner and I are planning on buying our second property within the next year. My plan is to buy a 3 bedroom townhouse in Craigieburn, Victoria and live in it while being on an interest only loan. We plan on turning this into an investment after 5 years or so but my partner is quite adamant on a house within the same area, or surroundings. Curious to see what our best interests are. We already have a 4 bedroom investment property in Ballarat, but any advice would be great.
I believe - best to engage with one of the Mortgage Brokers here. We did get IO on owner occupied recently refinanced with CBA - wasn't a new purchase though.
Most lenders don't want to do IO OO and as Terry says those who will consider it need a good reason. Your interest costs would be higher too; it'd be worth doing the numbers on IO OO vs. OO P&I and then switching it to IO INV once you move out (both from an interest cost & capital preservation perspective).
You'll find IO rates are actually about the same, or even more expensive for OO IO than INV IO. Is there a reason for not just going straight for the forever house if it's in the same area? It might be possible to do that AND invest at the same time.
Hi guys, Thanks for the advice will definitely speak to a broker soon regarding this. My only concern was if I do go P&I on our first owner occupied that this would reduce our tax deductible debt if we want to turn it into an Investment.
Yes it will - sadly, the banks do make it difficult (but not impossible) to go this way. There are other options that can reduce the impact a bit, but there's pro's and cons to that too.
A few lenders will do IO on PPOR, and especially with the logic you have provided AND if your servicing is strong, and the LVR is sub 80, there is a decent mix of lenders and not bad rates per se. Lenders do discourage it too, as where u can clearly see where IO inv at CBA is often LOWER than IO PPOR. Having said all that, when doing the numbers, one must not forget to take into account the NPV of the reduced tax deduction, because this is a gift that keeps on giving, and is reverse compounding to boot. Properly structured rates can start from 2.8 for a 2 or 3 year fixed with real true 100 % offset, or 3.2x on variable with a real true offset, of from 3.0x if u can put up with a redraw offset. Rates per se arent really the topic here, the spread is, and to make decisions on data. ta rolf
Thanks Rolf! Servicing shouldn't be an issue. LVR would definitely be sub 80%. Have looked at rates with some even being as low as 2.6 fixed for 2 or 3 years. Will crunch some numbers tonight and see what I can dig up. Thanks again
