Hey guys,
Im thinking about changing my loan over to interest only, my loan currently stands at $110,000.My question is, while paying interest only if I make a lump sum payment of $5000 for the next month will my repayment only be the interest charged on $105,000 intead of $110,000 ?
So while paying interest only do you repayments go down as you pay off the principal ?
Thanks
If your loan is set up as an interest only loan with the ability to pay off pricipal as you want (most are) then you only pay interest on what you still owe of the principal.
So, the answer to both questions is;
1. you pay interest on $105k,
2. yes.Thank you
Why not switch it to Interest only and then link it to a 100% offset account.
Deposit the $5000 into the 100% offset account and be charged interest on the net balance.
Richard Taylor | Australia's leading private lender
I have my loan with Homeside and it is a Plain & Simple loan which dosnt alow me to have a 100% offset account, and to swap over to a 100% offset account type loan i need a loan of $120,000+ which im just under
But ill defently be looking at a 100% offset loan with my next purchase..
I have my loan with Homeside and it is a Plain & Simple loan which dosnt alow me to have a 100% offset account, and to swap over to a 100% offset account type loan i need a loan of $120,000+ which im just under
But ill defently be looking at a 100% offset loan with my next purchase..
If you made a lump sum payment of $5000 on a $110,000 IO mortgage wouldnt that just pay the interest not the principal so therefore paying the interest on a $110,000 mortgage not $105,000??
Most loans have the interest calculated on the daily balance and then added to the loan once a month. So when you deposit that $5000 you will be charged interest on $105,000 from that day onwards. The first month may see a small decrease in interest as the deposit may occur mid way through the cycle. The next month should have the full effect.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
i didnt think you could pay pay off any of the principal on an IO loan??
James007 wrote:i didnt think you could pay pay off any of the principal on an IO loan??If you were to pay more than the interest, this would come off the principle.. I think most lenders allow extra repayments.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
depends on the lender methinks … most banks seem to 'cap' the principal repayments on IOs at 20K …
'stand alone' offsets generally have a higher interest rate too I think … also pays to ask if the offset is calculated on a daily basis – same as the mortgage … or one can get a nasty shock
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