All Topics / Legal & Accounting / If you prepay 12 months worth of Interest when is your next Interest payment due

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  • Profile photo of woohah76woohah76
    Participant
    @woohah76
    Join Date: 2014
    Post Count: 20

    Silly question, my immediate assumption is the answer is 12 months however ive been given conflicting advice from the bank so am asking experienced investors out there.
    If I was to prepay 12 months of interest on an interest-only investment loan, does that buy me 12 months of time before my next payment is due?

    Thanks for your help and insight

    Profile photo of ChrisA1ChrisA1
    Participant
    @chrisa1
    Join Date: 2011
    Post Count: 172

    Hopefully one of the experienced legal and finance peoples out there can shed more light, but I would have assumed this bought you time, and locked in that rate for the 12 months worth of interest payments (great if the IR was looking to go north, but not as good if the IR was looking to go south).

    Best to ask your accountant how they viewed it and the pros and cons of options.

    • This reply was modified 6 years, 11 months ago by Profile photo of ChrisA1 ChrisA1.

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

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

    Yes. prepaying means paying in advance. The loan will be fixed for the next 12 months so no payments will be due until the expiry of the 12 months.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of woohah76woohah76
    Participant
    @woohah76
    Join Date: 2014
    Post Count: 20

    Thanks for that. With that being said, does that mean you can only prepay interest on “Fixed” Interest-Only Loans or can you prepay interest on “Variable” Interest-only Loans as well? If so will you just have to make up any short fall if the rates were to go up through the year?

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

    only on special 1 year fixed loans. Variable – the amount of interest is not certain.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

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