All Topics / The Treasure Chest / Principal & Interest or Interest Only??

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  • Profile photo of jaykatjaykat
    Member
    @jaykat
    Join Date: 2003
    Post Count: 6

    My husband and I are about to purchase our first +ve IP. Our Mortgage Broker has suggested we take an interest only loan. Is this what we should do or should we make it pricipal and interest???
    any feedback will be appreciated

    Thankyou[:D]

    Profile photo of LeighLeigh
    Member
    @leigh
    Join Date: 2003
    Post Count: 130

    Hi jaykat,

    Search the forum for ‘interest only’ and see what comes up. This topic has been covered heaps of times and you’ll find everything you’re looking for.

    My personal opinion is that IO is the way to go if you’re investing for cashflow.

    – Lower monthly payments

    – You can still make payments straight off the principal if you wish

    – You’ll probably only end up refinancing/redrawing your principal repayments later on anyway, this may incure fees to do so, so it may even be worth putting them aside in a high interest account (such as Adelaide bank – 5% interest, no minimimum term) so you have immediate access when you need it

    Hope I’ve helped.

    Cheers, Leigh


    “If you can count your money, you don’t have a billion dollars”
    J. Paul Getty


    Profile photo of HomeLoanGuyHomeLoanGuy
    Member
    @homeloanguy
    Join Date: 2003
    Post Count: 26

    Hi,

    Generally, most investors will go with Interest Only for the investment property, if they still have a loan against their Owner Occupied Property. The rational here is the interest on the investment loan may be a tax deductible expense (please confirm this with your tax advisor, you do have one don’t you?). Whereas the interest on your Owner Occupied property is not a tax deductible expense. So you should apply as much funds as possible to the Owner Occupied debt to reduce it as quickly as possible.

    However, if you do not have any consumer debt or Owner Occupied debt, then you may still go Interest Only (variable rate or split loan), knowing you can make lump sum repayments at any time to reduce overall debt.

    The real answer is not here, you must consult a financial planner and/or tax specialist.

    Gary Young
    Home Loan Connexion
    Mobile 0407 64 66 32
    Fax +61 7 4636 4841

    Profile photo of jaykatjaykat
    Member
    @jaykat
    Join Date: 2003
    Post Count: 6

    Hi Leigh,

    Thankyou for your help, it had helped me feel a lot more confident. Being new at investing in property, it helps to hear other investors opinions.

    Thanks again
    [:)]

    Profile photo of jaykatjaykat
    Member
    @jaykat
    Join Date: 2003
    Post Count: 6

    Hi Home Loan Guy,

    Thankyou for your feedback. We are currently looking for an accountant to help us. We do have a loan on our PPOR so what you have said makes a lot of sense.

    If you know of a good accountant could you please let me know. We are currently living in Brisbane.
    Thanks again.[:D]

    Profile photo of calroncalron
    Participant
    @calron
    Join Date: 2003
    Post Count: 78

    Interest only with a line of credit.. Much better for the hip pocket and piece of mind….
    When you think about it, you take out the loan for 25 – 30 years.. The principal that you will need to pay then after all that tax deductable interest is going to be the equivalent to buying a pair of shoes or something in that amount of time..

    IO + LOC = GL

    Calron the Alcamist
    Turning things into gold is fun.
    [email protected][;)]

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781

    Home Loan Guy is spot on. I would advise you to pay IO on any deductable debt whilst you have any non deductable debt.

    Cheers

    Simon Macks
    Mortgage Hunter
    [email protected]
    0425 228 985

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Hi Jaykat

    Why not try Cabreras on the northside 07-3888 6399. Steve there has always been helpful to us.

    Cheers Richard
    [email protected]

    There is no such thing as a problem.
    Just a solution waiting to be found

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of jaykatjaykat
    Member
    @jaykat
    Join Date: 2003
    Post Count: 6

    Hi Qld’s 007

    Thankyou, I will give Steve a call.[:D]
    regards
    Katrina.

    Profile photo of JohnbJohnb
    Member
    @johnb
    Join Date: 2003
    Post Count: 15

    Hi Jaket

    I’m in Canberra and will be doing IP’s in Melbourne. I have two accountants. One in QLD and this new one in Canberra. The new one has nine IP’s himself, so I feel pretty confident with him.[:D] When I do business with these guys I just email the questions or data.
    If you want I can pass you his name.

    Johnb

    Profile photo of jaykatjaykat
    Member
    @jaykat
    Join Date: 2003
    Post Count: 6

    Hi JohnB,

    That would be great if you could give me his details.
    My email address is
    [email protected]

    thanks

    Katrina

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