I posted a few weeks back on whether we should sell our IP given that we are moving overseas. We’ve decided to retain the property but my next question is should we switch from an IO to a P&I for our IP loan whilst we are overseas?
My thinking is that considering we won’t be able to recognize any of the tax deductions until we get back to Oz and file our return, and that the value of property has done nothing but move sideways, we might as well start making a dent in the principal. Also considering the new tax rates and the accumulated deprecation amount, I’m guessing that it doesn’t make sense to maximise my tax deductions?
I’d like to hear what people think?
Depends on if you have other debts, and also if you think your funds can be invested for a higher return elsewhere.
If you have other debts then you should probably pay the non deductible ones first, then the ones with the highest interest.
Terryw
Discover Home Loans
Parramatta
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
It depends how you veiw it,a P/I loan will be a higher repayment which means more cash out of your pocket and you can’t claim any of the principle anyway
For eg a $300,000 loan on P/I @ 7.5% will cost $2097 per month and on interest only will cost $1875 per month so you are paying an extra $222 per month or $2664 per year.(not deductible).
Your property is (Historically) growing by 10% or $30,000 per year so your question is ,is it a worthwhile exercise to pay $2664 a year in principle off it when on paper it is growing that much.
Why not ask your lender if you can make extra payments off your current interest only loan,if they won’t do that there are lenders that are more than happy for you to make extra payments on your interest only loan without penalty.
The worst scenerio is they say noPaul Meese
Onyx Finance
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0412 850 820
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