I realise this question is not easy to answer because of different circumstances for individuals,but in general what is the most effective loan structure for a buy and hold strategy.Regards to all…….Gavan.
Hi Gavan,
You are right, it is a very hard question to answer without delving deeper into your situation and your goals.
In general though, if you have a principal place of residence and want to pay the loan down quickly, then you would need a flexible type loan. If you were hoping to reduce the debt on your investment property in the same manner then the same sort of loan product would be suitable.
If you are more concerned about reducing other debt you hold (eg owner occupied home loan) and the loan you have/ or are considering is an investment loan, then you may want a more basic loan (at a cheaper interest rate) which would allow interest only payments.
I must stress that it is very hard to answer your question without knowing your current position and future goals, but in general what I have said should hold true. ie only pay a premium on the interest rate for features you will use.
Cheers,
Nathan.
P.S If you want a more specific answer fill me in on a few more details / goals.
Hi Gaven,
When you say loan structure, are you referring to Variable vs Fixed Interest rate, Interest only bs P&I etc?
Regards,
Brett [
]“Even if you’re on the right track you’ll get run over if you just sit there.”
Thanks for the replies guys.Yes Brett I am refering to interest rates,interest only vs p&i etc.
My simple advise is this:
If you are still paying of your loan on your PPOR and have equity you are using from that property then you should purchase your investment property on an interest only loan and use any additional funds to pay down your debt on your PPOR, thereby increasing equity.
Cheers
Gavan
just a bit more info for you…
The rationale behind having the loan on the PPOR paid off and making the payments on the investment properties minimal (even convert loans to Interest only if feasable) is that you can not claim a tax deduction for cost of finance on your PPOR.
As this comes from the angle of a negatively geared portfolio you must run this past your accountant for clarification of your personal circumstances to see if it is effective for you.
hope that helps
cheerio
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