This might sound a bit odd and I don't know whether it's possible.
Can you pay interest only on an owner-occupier? My thinking is you might wish to own a property but wish to keep your repayments lower until you are in a better position to make principal payments. Even though you are "blowing" interest that's not tax deductible, mightn't it be better than "blowing" rent that you have no hope of ever seeing a return on? You may have a property that shows good growth and in time turns out to be a good investment.
I haven't done any comparison on the amount of interest payable v rent on a given property. Need to find a loan calculator. Anyhow let me know if this is possible and whether you see any value in it. Or am I running up a dry gully?
HI wezwaz
As far as I am aware you certainly can. this allows you to build future deposits for IP faster. Some advisors actually suggest that you will progress faster if you do it this way. As you will acquire more land to have capital growth on and this will be more beneficial than the extra payments off your home loan. i'm no expert but this is what I've heard at property seminars I've attended.
Rudolph
Yep you can. In fact it is probably a good idea to go IO with a 100% offset to keep your loan high, so if you ever move out and rent your house the deductions will be higher.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:Yep you can. In fact it is probably a good idea to go IO with a 100% offset to keep your loan high, so if you ever move out and rent your house the deductions will be higher.Terry
When you say deductions will be higher, guess that simply means because your loan stays high the deductible interest as a rental will be higher.
How does the 100% offset work? I'm not familiar with that.
Thanks.
WEZWAZ,
If you don't have an offset account I think you should look at setting one up to store any cash that you don't need right at that moment, it works like this,
Say your home loan is $100,000 and you have an offset account linked to it with a habalance of $2000, your $2,000 in the offset account will save you interest on your loan for every day you have it in there you only get charged interest on $98,000 instead of $100,000.
this sort of account in better than any other account such as an ING account because your money with be saving you most likely over 7% or what ever your home loan rate is instead of 6% like an ING account, and also because you are saving interest rather than earning interest you won't be subject to tax as you would if you had your money in any other high interest account.
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