What to do with I/O after the end of period

Hello guys,

My wife and I are considering buying a new house for investment. Locations, growth, cashflow, risk and all that things are covered, but we have one question.

How you can grow a property portfolio if you have an I/O property, what happens after the end of that period, are you forced to sell the property to avoid P&I with massive repayments?

Thank you.

 

Plenty of options. Depends what you want to do. You could see if your lender will extend IO, you could refi to another lender, taking on the term. But again, depends what your strategy is, if you are planning to hold onto the IP then you should consider what your plans are to pay it down.

 

Case by case as different options will have different implications on borrowing capacity / objectives...

Most will either extend a further IO term with existing lender or refinance externally to a new IO term and back to 30Y overall term to help unlock further borrowing capacity.

 

So you can refinance to another lender with I/O again?

 

4 options
a) let it revert to PI and face much higher repayments
b) refinance back to 30 years as PI with lower repayments to a) but higher than IO
c) extend IO 5 more years at the same lender - dangerous potentially as when it reverts to PI in 5 years there will be 20 years remaining on PI which will be very high repayments
d) start off on PI so you avoid a sudden jump

 

If reverting to P&I will mean you are forced to sell the property, how will you handle interest rate rises? As a guide, your P repayments is about 2% of the loan a year.

 

Thanks everybody for the answers and tips!

 

Could also look at selling (one you're done acquiring) and consolidating debt.

 

With the interest only payments are you managing to build up a deposit for the next investment?