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  • Profile photo of rayman9977rayman9977
    Join Date: 2012
    Post Count: 1

    In the process of buying my first investment property which I am able to receive positive cashflow, so should I use a Interest only loan or Interest and Principle?

    Profile photo of Mick CMick C
    Join Date: 2010
    Post Count: 1,099

    Generally speaking I/O with an offset is preferred by most investors and even home owners…however it will depend on your goals, plans, borrowing capacity and product/rate ( ie some lenders charge a higher rate for i/o…..and some products don;t allow for i/o at all).

    If your not too sure what your going to do and have no short/long term goals etc…then stick with I/O with an offset it provides the highest flexibility and it’s hard to go wrong with that set up, especially if it;’s an investment property



    Mick C | Shape Home Loans
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    One idea (or 2) behind using IO is to use as little cash as possible for investments so that:

    1. You can pay off your own home sooner, and/or

    2. Invest in more properties.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide)

    Profile photo of Jamie MooreJamie Moore
    Join Date: 2010
    Post Count: 5,069

    Personally I'm a fan of IO loans accross every property in the portfolio – even the PPOR. I wrote an article for API magazine on this recently – instead of copy/pasting, here's the link



    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of v8ghiav8ghia
    Join Date: 2005
    Post Count: 871

    My thoughts are that IF you own you own home outright and have no other non tax deductable debt then by all means go for a P&I loan as the idea to building wealth is made up of three key items; reducing debt, increasing income, and selling/locking in a capital gain or profit which in this case you can do the first two – any other situation I/0 loans make much more sense 99.999% of the time, both for tax reasons and flexiblity, as who knows what may change in your personal circumstances or property plans.
    All the best

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