gatsbyMember@gatsbyJoin Date: 2003Post Count: 708
I just wanted to put this to the good folk on here.I've always held my two investment properties loans as variable interest only. About ten months ago I changed them both to variable P+I (paid weekly) with the interest coming out of the redraw on each property. It appears though that I'm hardly getting anywhere in reducing the debt? I've been paying an extra $1k-$2k extra a month on my repayments to try and cut down the debt.
My question though comes from what a property investing friend told me. He informed me that for the first 7 seven years (roughly) you are only really just paying interest before any principle reduction begins to kick in. Therefore, he told me that I am better off going back to holding both properties as IO again and to continue paying any extra 'myself' on top to reduce the balance? Does this sound like a quicker way to reduce the balance or should I just be patient? My main goal is 'debt reduction' on these two investment properties. I watch how the balance goes down each week (plus what I add on top) then that once a month interest fee on each just seems to gobble up my extra repayments? Many thanks in advance!
Gats!Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
If your main objective is to pay off both debts asap then keep them as P&I.
If you have any non-deductible debt (PPOR loan, car loan, credit card, etc) then best to pay of this debt before paying down the IP debt.