All Topics / Help Needed! / interest only loans

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  • Profile photo of dragons_1908dragons_1908
    Member
    @dragons_1908
    Join Date: 2004
    Post Count: 12

    with an interest only loan do u keep on paying off interest until u sell the property or is it for a fixed time and i was also wondering if u can choose to pay off part of the princable or if only paid off at point of sale. sorry if this qs is basic knowledge im 18 and only jst gettin into the property game thanx[thumbsupanim]

    Profile photo of BarnseyBarnsey
    Participant
    @barnsey
    Join Date: 2004
    Post Count: 70

    Hi
    As I understand it, you keep paying interest until the principle is paid in full.
    So if you borrow $100k, you’ll payinterest on that $100k until you sell the property (giving you the funds to pay out the original $100k) or if you’ve done really well with your other IPs (Investment Properties) & have the cash to pay it out. Make sense? I hope so (not convinced myself!!!).
    Remember to use the site’s search engine for all this sort of stuff & there are loads of threads on all the abbreviations too.

    Good luck [suave][suave]

    Regards

    Patrick

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

    IO loans have an IO period of between 5-10 years.

    They then revert to P&I for the remaining period. This IO period can often be renegotiated for a further 5-10 years.

    You can usually pay off part of the principal in this period.

    Hope this helps,

    Simon Macks
    Mortgage Broker
    http://www.mortgagehunter.com.au
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of nugennugen
    Member
    @nugen
    Join Date: 2003
    Post Count: 58

    With an IO loan you never reduce the loan amount unless you add extra payment off your principle. It is good to reduce payments and used with an offset account will have better tax results.

    Nugen

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