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  • Profile photo of John LoisJohn Lois
    Member
    @john-lois
    Join Date: 2004
    Post Count: 5

    Hi Guys

    Your opions & advie please on P & I loans as compared to Interset only loans for purchasing an investment property.

    Best Regards,

    John & Lois James

    Profile photo of MyydralMyydral
    Member
    @myydral
    Join Date: 2003
    Post Count: 259

    Hi there. Please do a search on this. This exact question has been asked before. You may find the info you want there.

    And by the way, welcome to the forums.

    Cheers

    “Looking forward to the day when I can tell the boss where to go”

    Profile photo of wilandelwilandel
    Member
    @wilandel
    Join Date: 2003
    Post Count: 761

    Hi John & Lois,

    We have always opted for P&I loans…

    We prefer the sleep at night factor, that our loans are reducing. It means more to us than extra cashflow.

    Our only Interest Only loan is a commercial one, which although it still is +ve cashflow if it were P&I, we are using it as cashflow for other properties (just in case)…

    Good luck,

    Del

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

    If you have a home loan or any other non deductible debt then I would make all IP loans IO and direct all principal payments into the non deductible debt.

    Same affect on your net position – just keeping it a little more tax effective.

    Cheers,

    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 WarriorWarrior
    Member
    @warrior
    Join Date: 2004
    Post Count: 2

    From recent experience, P&I loans work well with a line of credit ON YOUR PRINCIPAL PLACE OF RESIDENCE, Int only loans are a good way to invest if you are on a med to high tax income bracket.

    Profile photo of FFCommFFComm
    Member
    @ffcomm
    Join Date: 2004
    Post Count: 627

    I like Interest Only loans as the create a higher cashflow from my properties. But some people prefer P&I (for the sleepfactor as mentioned above).

    Rgds.
    Lucifer_au

    Profile photo of yesfella28061yesfella28061
    Member
    @yesfella28061
    Join Date: 2003
    Post Count: 11

    I always use interest only, low doc loans, as a line of credit.
    The interest is all tax deductable. However, if you use P&I, as your principle is paid back to the lender, your tax liability goes up.
    I never want to own my properties, as I will loose my tax advantage. Eventually, my properties double in value, by experiance over the last 7 years, then I sell one or two and payout some loans, then go and buy again.
    I live on borrowings, no tax payable on loans. As inflation makes the value of my homes go up and I see some valuable equity in them, I borrow to put in my pocket.
    Maybe, one day I will tire of all this, sell some, pay some out and just lie in the sun collecting flies.
    Ask your accountant about this action.

    Profile photo of ADAD
    Participant
    @ad
    Join Date: 2002
    Post Count: 636

    I once loved the Interest only loans but now I usually go Principal and interest. Wilandel summed it up but I also remember that you can’t go broke owing nothing. Sooner they are payed off the sooner you are getting great cashflow. It also depends what you are after, if you are cashflow poor then IO may help. If on the other hand you don’t need cashlfow then reduce that debt to enable you to buy more. Situations dictate the strategy.

    Enjoy
    AD [:o)]
    (Andrew)

    It is good to have an end to journey toward, but it is the journey that matters in the end.

    Profile photo of Chris100Chris100
    Participant
    @chris100
    Join Date: 2004
    Post Count: 22

    J&L- Interest only for sure – the financial advantage to you may be in the longer term- dont forget in a few years you will have a debt that hasnt increased, yet the property value may have. You will have possibly had some tax advantages, and kept your cash out to a lower lever while establishing yourself- paving the way form more investment purchases as well!

    Chris Durman
    Commercial Capital Finance Pty Ltd
    B 07 3853 5221
    F 07 3853 5256
    M 0427809858
    C/- Brisbane Technology Park, 1 Clunies Ross Court, Eight Mile Plains, Queensland 4113
    ACN 110 082 347
    CAUTION – This message may contain privileged and confidential information intended only for the use of the addressee named above. If you are not the intended recipient of this message you are hereby notified that any use, dissemination, distribution or reproduction of this message is prohibited. If you have received this message in error please advise the sender by reply email. Any views expressed in this message are those of the individual sender and may not necessarily reflect the views of the Commercial Capital Group.

    Profile photo of ADAD
    Participant
    @ad
    Join Date: 2002
    Post Count: 636

    John&Lois,
    For me the bottom line is seek professional advice relevant to your situation. You have heard what others think and that suits them and their situation but they do not know your situation. For any of us to come out and say conclusively that you must do P&I or IO is wrong. You are unique and a good broker will help you find out what suits you. As to good brokers that is a whole thread in itself which has been done many times.

    Enjoy
    AD [:o)]
    (Andrew)

    “Work joyfully and peacefully, knowing that right thoughts and right efforts inevitably bring about right results.”

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