Hey… I’m pretty new to this game, but with the strategies that Steve has pulled together, it is my understanding that Capital Gains is not the driver but rather, how much more rent you can pull in than mortgage payments going out. If so, then why aren’t all mortgages placed as Interest Only? This would surely maximise rental return, and the property price will certainly appreciate over the coming 25 years. Sounds like a more win win situation to me.
Many investors do choose IO. It usually is a matter of personal comfort. Some folks are happy to know the debt is going. They see it as an additional enforced savings program.
Cheers,
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Welcome aboard [
]Hmm, yes, food for much debate. The short answer is that it’s a risk minimisation strategy that ensures that in years to come you are more insulated against events like extended vacancy and inc. interest rates. Also below 80% LVR you avoid lenders mortgage insurance which is significant and ‘lost money’.
There are plenty of reasons not to as well – time value of money, maximising income leveraging ability etc so depends on your overall strategy I think.
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Mel
[email protected]Hi Guys
Yep, personal comfort and how fast you want to accumulate properties.
Personally I’ve got two loans on P@I totalling $145000 on three properties and two Int. only loans totalling $283000 also on three properties.Regards
another point to remember with interest only is that you can apply the extra dollars saved to increasing the equity in your own home and reducing the bad debt[
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