rates dropping on investment

Our equity loan interest rate we used to purchase a IP has dropped from 4.08 to 3.68

It was a email from the bank to say hey look your repayments are getting easier.

Should I leave it and pay less or change it back to what it was?

 

too broad a question to answer really.
Still a high rate

 

are you asking whether you should increase the rate back to 4.08% from the current rate of 3.68%?
OR
are you asking whether 3.68% is too expensive and you ought to negotiate with the bank?

 

Q Is it $1m or $50K ?

Equity can occur two ways
1. Property value increases
2. Debt reduction
Ideally both. This can magnify equity using leverage principles. eg value rises by $10K and loan falls by 10K.

Often I am surpised by the volume of investors who love when property values rise and moan when they fall but they ignore repaying debt which is a strategy too. Equity can always be reborrowed later. Or some of it. Part of the juggling act involving cashflow.

 

its a 90k loan, im asking if I should leave it with the new repayment reduction. Or should I set it back to what it was and pay loan down faster?

 

Do you have any non-deductible debt?

 

have my ppor loan and the equity loan

 

Why not pay off the non-deductible loan first?

 

I am paying non deductible first, i havnt paid any extra on the equity loan or the IP loan. But because the cash rate got cut my repayments went down. Im asking if i should keep paying the same as it was or should I let them reduce. The new rate cuts save $25 a week.

 

If you keep paying the same you will be diverting funds from the reduction of non-deductible plus reducing your tax deductions and paying more tax.

 

The switching effect.... As income or benefits arise maintain the existing outflows by applying less to the "good" debt and the offsetting increase to the worst debt.

ie : Credit card first, then non deductible starting with the lowest balance loan or highest rate and so on.

Can do it with salary increases, super contributions, school fees and many many other matters. You wont even miss the money as your cashflows dont change.