Switch P&I to IO Same as Making Extra Repayments?

Double checking something I heard- if someone has a fixed P&I loan and switches to an IO loan with 100% offset but keeps the rate fixed and makes the equivalent payments of the P&I amount, is that the same as making 'extra' repayments? Looking at an extra repayment calculator and seems too easy for the amount of time/money someone could save on the mortgage.

E.g. P&I repayments are $3k per month on a $500k loan but IO is $2k per month. If one switches to IO but keeps repayments at $3k, would that $1k then be considered an extra repayments and therefore reduce the Principle outstanding the following month to $499k?

Is it easy to get a P&I loan first and then switch to IO asap?

 

Only a few lenders allow offsets on fixed rates.

Assuming the loan has an offset then paying extra into the offset is not the same as paying extra into the loan. It may result in the same interest, but the loan balance would be the same - not going down.

But if the loan is IO and you are paying the PI equivalent the baalnce is going down and if there is a redraw facility these funds could be redrawn later.

It is getting harder and harder to get IO loans so maybe best to get one sooner rather than later.

 

I'm not sure I understand what's the point of getting P&I with the intention of switching to IO.

With the offset account, any money sitting there will reduce the amount that the interest is calculated on.
Ex. In simplistic terms
On 500k @ 4% interest you would pay 20k interest per year.
If you have money sitting in your offset account. Say 10k the equation will be that you pay interest on 500k-10k from offset=490k @ 4% interest would equate to 19600 interest saving you 400 dollars.

Those 10k sitting in offset are still your money and you are free to withdraw it at any time.

Hope that makes sense.

Ps also I don't know about IO being fixed rate. I thought it's always variable.

 

It may be easier to get a P&I loan these days?

And yes you can get IO Fixed Loans. IO Fixed with an Offset is almost unicorn status however.