Hi all
can anyone give advice regarding IP. Its our first one and even thought we have been approved by lenders, they all seem to want 10% down on interest only loans. I realise interest only is the way to go for IP, due to tax benefits, but using most of our saved cash for the down payment seems a bad choice when lenders will give you 95% of the loan if it comes under a principle and interest only
confused
DAB
It sounds to me that you have had a fully unencumbered home already. Congratulations.
Secondly, what is your main objective in the first investment. If you are after income, then put in as much saving as you could to make it positive cash flow. and do principal & interest repayment. And use the built up equity to purchase the next one.
If you are after negative gearing, then borrow as much as you could, pay interest only to offset your tax.
I beleive others would give you another side of the coin.
Cheers,
thank you … i thought the latter would be the most appropriatte for our purposes and with the tax incentives.. good news was able to obtain a 95% interest only loan without mortgage insurance, so will be definately following this path.Thank you for your reply
DAB
DAB,
You will find that the requirement to pay P&I borrowing above the 90% will have come from the Mortgage Insurer. Some lenders require P&I if borrowing above 80%. It’s just a way of them covering there own butt, in that the assett will cover the money they are lending, which at 90-95% is not guatanteed in a falling market (as parts if Sydney and Melb have been and may continue to do).
Mal
Getting out of your comfort zone, can help you become comfortable
Hi DAB,
If you are using your PPOR as security you should be able to borrow 100% of the investment property. Even if you have no other property you can go interest only on a 100% loan.
This might not be that important for this purchase, but if you want to continue to move ahead, in terms of acquiring IP’s, I suggest you find another lender.
Regards
AlistairPerhaps you should be looking at the reason for investing in property? If you are chasing the interest deduction to get “tax benefits” then this means you are making a loss. Making a loss is OK when the capital gain exceeds the accumulated losses but from what I’ve seen over the years that everyone is happy to get the tax refunds each year but extremely unhappy to get the Capital Gains Tax bill. Try to avoid looking at the whole deal based around the immediate tax benefit, also look at which person or entity should hold the property.
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