Reality check please

Call me nuts, call me crazy. I reckon I should be paying lower rates than these:

IP#1 @5.65% WESTPAC
IP#2 @ 5.37% NMC
IP#3 @ 4.86% NMC
IO TERM LOAN @ 5.65% WESTPAC (equity waiting to be used)
LOC @ 4.49% MACQUARIE (66%drawn)

All ip are svr term loans.

The next kick in the guts is on 8th August when NMC increase their rate by 0.35

Your thoughts on fixed IO vs fixed PI in the current climate? I would seriously consider PI if it was not going to be possible to increase our cashflow by finding cheaper io options. My gut tells me to fix, but let's just take a step back and see what suggestions come to pass. Thanks PC community.

L

 

Yes, worth trying to lower those high rates.
Where is the owner occupied rate?

 

I would change to P&I @Westpac @3.88% (not sure still available at that rate) - you will be paying almost the same amount but always good to pay down the debt. There are few threads re: at what rate paying P&I is better than IO

 

OO paid off thankfully. Pulled out equity from this 1m+ Melb eastern subs home and used it for dep+costs for ip2+3.

Good thinking @samiam

 

Do you have a good broker? There's heaps of them on here who could sort you out.

Those rates are high.

 

Well why are you not paying OO rates on some of your loans?

 

With rates like that you may be able to fix P&I and keep similar payments!

 

Our broker has been good, but as I become more savvy with the finance side of things, I know he is limited by his pool of lenders and those rates. I need to find another broker who is going to better for us.
This whole issue was sparked from our accountant telling me our rates were just too high. My concern with pi loan, our tax deduction is reduced and the benefit will be paying down debt. We should re-evaluate as circumstances change in the next 18-24 months and refinance again if necessary. This sound reasonable?

 

Jess, I could save just over $1000pm if I went to 3.88% what a difference it would make to our cashflow.

 

It doesn't matter if your PI payments are less than you are currently paying IO - added bonus of paying off the loan.

reevaluate every 12 months.

 

Who is NMC

You could/can do better fixing and looking at P&I,

 

Tax deduction is a bit overrated imo

 

National mortgage company Pty ltd = nmc

 

So just to clarify, the interest portion of the pi loan would be the same so tax deductions would not change. Cash flow would improve and I would have added bonus of reducing debt.

 

With a PI loan the balance would be decreasing so your tax deductions would decrease over time.

 

Yes, agreed. Since our intention is to continue to acquire more ip's later on, the impact of the reduction in interest is minor?
I am trying to make a solid decision on whether pi would be the most favourable for us going forward.

It is a sea of brokers out there. How can I possibly know which one will be right for us?
I read @Michael_X had received accolades and that was exciting to read wonderful testimonials about his service. Might start there....but what about a broker in Victoria, where we live. Does it make any difference? Do the states have separate rules on how brokers conduct business?

 

If your servicing is good and LVR is low it can be worth considering paying P&I, but it MUST be done with consideration to your longer term plans. If you rush in, you may find you're not be able to revert to IO when you need to which will mean you can't buy more when you want to.

Brokers can work from anywhere, it doesn't need to be local.

 

To

To Work out lvr, do you include your OO residence or just IP?

 

All depends what you are trying to achieve.

 

Wow those rates are high across the board. Can definitely make it far cheaper.

May be worthwhile doing a full review and seeing if you can make your portfolio more efficient while maintaining structure to achieve goals. Plenty of options - cheaper fixed P&I rates, swap to P&I, IO fixed rates, even cheaper SVR IO loans. Will depend on whats available to you and what you are seeking more broadly as to which route to take moving forward.