- minds-eye wrote:Hi, newbie question here. I've just learnt about the benefits of Interest only + Offset account just yesterday.
Is it fair to say that If i had a P+I loan repayment of 850 per week (500interest,350principal) would it be effectively exactly the same as paying 500 on IO and putting 350 into the offset account?
To me, it seems like a no brainer to use IO because you have a great deal more flexibility + cash liquidity.
What is the catch here? It is harder to secure an IO loan? Do banks prefer you to have P+I ?
That is correct. The only risk with hte offset and IO is that some people are more tempted to spend the cash.
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
The catch apart from the temptation of spending the offset money as Terry alluded to is that if you take out say a 30 year loan with 5 years IO, the calculated repayments once the IO period is over (for the remaining 25 years) is much higher than standard to account for the shorter remaining term. However in saying that you can normally extend the interest only period further once it finishes.
it shouldn't be harder to secure an IO loan, in the end you are paying the same amount of interest to the bank so they aren't losing any money by you being on IO repayments.
Cheers
Tom
Hi guys,
Could someone please clarify for a beginner like myself whether you are able to restructure your P+I loan to IO? And also, what happens when you've paid of the interest and your offset account balances out your loan eg. you have 300k in an offset account for a house with an initial 300k loan?
Cheers,
Donnie
Theres nothing stopping you trying to restructure from a P&I loan to IO. Most likely you will need to provide updated financials to the lender.
If you have a $300K interest only loan, and you have $300K in an offset, then your monthly repayment reduces to zero.
Cheers
Tom
Be nice guys… it's his money, his life. At least he's not on the dole, not costing us any money.
Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
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