PPOR repayment: Interest Only vs PI

Discussion in 'Loans & Mortgage Brokers' started by ff3, 23rd Nov, 2021.

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  1. ff3

    ff3 Well-Known Member

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    Hi

    Looking for some quick thoughts. I've had my PPOR on an IO repayment, as we were considering renting this out at some point.

    We have decided to stay put so will be looking to purchase IP within the next 12-18 months. With that in mind, I know that the IO loans are viewed less than favourably by the banks these days.

    I've still got a couple of years left on IO, but wondering if I should recommence PI earlier. Any thoughts?
     
    ff3, 23rd Nov, 2021
    #1
  2. standtall

    standtall Well-Known Member

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    I wouldn’t bother changing the loans. Your future lender would likely adjust this to P&I in their calculations anyways and if they don’t, you may be able to borrow a bit more. No lender is going to hold this against you.

    Don’t volunteer to do something unless you are asked for!
     
    standtall, 23rd Nov, 2021
    #2
  3. Trainee

    Trainee Well-Known Member

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    Do you have an offset?
     
    Trainee, 23rd Nov, 2021
    #3
  4. ff3

    ff3 Well-Known Member

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    Yep have an offset - have been squirrelling funds in there..
     
    ff3, 23rd Nov, 2021
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You could keep it IO and loan recycle and debt recycle it into investment debt or
    You could split the loan and keep part PI and part IO with the offset on the IO portion - to help cash flow.
    Or just go all PI and save interest
     
    Terry_w, 23rd Nov, 2021
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  6. kierank

    kierank Well-Known Member

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    So you have a pseudo P&I.

    I personally don’t like P&I. I only have I/O with Offsets. Once I fully chock one loan, I start on the next one, the one with the highest interest rate.

    I can’t remember the last time I had a P&I loan. If a bank wants me to move from I/O to P&I, I just take my business elsewhere.

    I am a big believer in dancing to my plan, not the bank’s plan.
     
    kierank, 23rd Nov, 2021
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  7. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Why do you actually want the loan to be IO?

    I'm not suggesting that the loan shouldn't be IO, but unless you have a strategy in mind, the loan will only cost you money unecissarily.
     
    Peter_Tersteeg, 23rd Nov, 2021
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  8. ff3

    ff3 Well-Known Member

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    That's pretty much sums it up. I went with IO as I was going to turn it into an IP - but now I'll be looking for an IP down the track. I guess it is worth starting to cranking down the principal now.

    Terry I like your suggestions and will think about the split.

    thanks all
     
    ff3, 23rd Nov, 2021
    #8
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  9. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    Correct, if this current property is to remain as a PPOR now then it's a more viable option to pay down this loan.
     
    Tony Xia, 23rd Nov, 2021
    #9
  10. kierank

    kierank Well-Known Member

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    So it will NEVER ever be an IP?
     
    kierank, 24th Nov, 2021
    #10