Hi all,
I just found Steve's bonus chapter and read this with interest (pardon the pun):
"""
Plan to repay the debt: Except for the commercial property that we own, all the other dwellings
in our portfolio are on principal and interest repayment terms.
"""I'll have to go back and skim through '0 to 130' but I could have swore he used Interest only. Pretty sure that's the general consensus on this forum. Use IO and stick any extra into an offset account.
So again, I'm interested in fellow investors approaches. Interest only or PI and why? I can see that IO would mean more funds available for further purchases. I can also see how paying down the principal could speed up CF- properties becoming CF+. Thoughts?
cheers,
—
MarkHi Mark
Paying into an offset account on an IO loan is just like paying down the principle on a P&I loan. One of the big differences however is the flexibility the IO loan with an offset account offers.
Here's a real life example. Across my current portfolio, all loans are IO. On my PPOR I have an IO loan with an offset attached. I currently place any spare cash/savings in that offset account.
Soon I'll be leaving this property to live in another IP I own. Therefore, my current PPOR will become an IP. When this happens, I'll remove the money from my offset on the current PPOR and place it in the offset account linked to my new PPOR.
Some investors do prefer to have some loans set up as P&I. It's not how I would do things but differen't strokes for differen't folks.
Hope that helps.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Jamie M wrote:Hi MarkPaying into an offset account on an IO loan is just like paying down the principle on a P&I loan. One of the big differences however is the flexibility the IO loan with an offset account offers.
Here's a real life example. Across my current portfolio, all loans are IO. On my PPOR I have an IO loan with an offset attached. I currently place any spare cash/savings in that offset account.
Soon I'll be leaving this property to live in another IP I own. Therefore, my current PPOR will become an IP. When this happens, I'll remove the money from my offset on the current PPOR and place it in the offset account linked to my new PPOR.
Some investors do prefer to have some loans set up as P&I. It's not how I would do things but differen't strokes for differen't folks.
Hope that helps.
Jamie
That's pretty much how we've set things up (or are in the process of setting up) except PPoR is PI. Haven't been able to convince my wife that it's probably not the best way to go. I was just surprised to read Steve's quote above.
Hope the move goes well.
cheers,
—
MarkMRW wrote:Hi Jamie,That's pretty much how we've set things up (or are in the process of setting up) except PPoR is PI. Haven't been able to convince my wife that it's probably not the best way to go.
I personally think it's the ideal structure but it does require some discipline. I think it's important to get into the habit of making regular repayments into the offset and not just paying the bare minimum interest repayments.
MRW wrote:Hope the move goes well.Thanks mate – should be a fun month. Running the business and trying to renovate a house at the same time
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
I recall going to one of Steve's seminars about 10 years ago where he suggested using 33% of your income to invest, 33% to live on and 33% to pay down debt. Getting rid of debt is always good.
But, I think it can work out better using Jamie's strategy. particularly if you have non deductible debt as paying this down first will mean tax savings. You also have to be discipline to use IO/Offset – many people just start spending money if it is available.
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
Terryw wrote:You also have to be discipline to use IO/Offset – many people just start spending money if it is available.Completely agree and that's the message I always try to get accross. If you haven't got the discipline to make regular repayments into the offset then an IO with offset might not be the best option.
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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