Forums / Getting Technical / Finance / HELP! Changing from a IO to P&I loan

Viewing 9 posts - 1 through 9 (of 9 total)
  • Profile photo of DebbieDebbie
    Participant
    @debbiew74
    Join Date: 2017
    Post Count: 3

    Hi,

    I would like some advice. I have 2 investment properties and rent in the Sydney CBD. I am currently on an IO loan and have a 100% offset. I received a letter from my bank to say that from 1 November my IO interest rate would be going up by 0.40% but if I wanted to swap over to an P&I loan, it would stay at the same rate I am currently on (which is comparible to most other P&I investment loans).

    I am a single income so I am not looking to buy a PPOR. I love living in the CBD, can’t afford to buy here and happy with 2 investment properties. I won’t be buying another investment property either (I know people say, you should never say never, but with a single income, I am not looking to buy a 3rd one).

    Should I just convert to a P&I loan and start paying off the principal as well. I know its better to be putting all my money in the offset (which I am disciplined in doing) but is it worth paying 0.40% increase and still build up my offset or if I am not going to buy another IO property, changing to P&I payments is fine.

    I do have funds available to me already in my offset e.g. 200K and I can afford P&I payments as I have been keeping the principle part in my offset.

    Sorry if this a dumb question.

    Regards

    Debbie.

    • This topic was modified 1 year, 6 months ago by Profile photo of Debbie Debbie.
    • This topic was modified 1 year, 6 months ago by Profile photo of Debbie Debbie.
    Profile photo of Tony FlemingTony Fleming
    Participant
    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    I’d talk to a investment focused broker to maybe map out the different options available. Might be worthwhile to switch banks and get a better rate for the principal and interest loan anyway.

    I would never rule out investing again. Things change and Sydney might not be unaffordable for ever *fingers crossed*

    Happy to pass on broker details we use for clients if you would like?

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
    Email Me | Phone Me

    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of DebbieDebbie
    Participant
    @debbiew74
    Join Date: 2017
    Post Count: 3

    Hi,

    Thanks for your response.

    I have been working with my broker and I mentioned, my P&I rate is the 2nd lowest in the market (only 0.04% difference) so I am not really interested in changing for that amount.

    I definitely won’t be buying in the future, 2 properties is enough for me.

    The question I was more asking about was would there be any advantage of paying 0.40% higher on the IO rate and put the rest in my offset, or should I just change over to P&I.

    Thanks.

    Profile photo of JaxonJaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 282

    Debbie, firstly great work getting your first two.

    look, PnI over IO is just forced saving, if your doing it anyway and save (x) amount extra in the .4% per year (which you wrote differently a few times) then why wouldn’t you swap, providing there is no tax reason.

    what is your rate now?
    what did the bank state it will change to?

    I would be happy to have a chat and answer all the questions surrounding and give you a in-depth answer rather than the vagueness I can with the information so far. (feel free to message me to organise a chat time – 0431376130)

    Kind regards

    Jaxon Avery
    0431376130

    Profile photo of DebbieDebbie
    Participant
    @debbiew74
    Join Date: 2017
    Post Count: 3

    Jaxon,

    Thanks for the response.

    I am currently with Suncorp and my current rate for an Investment IO loan is 4.36% (with 100% offset) and they said they would keep me on the same rate if I was going to change to their Investment P&I loan, otherwise it is going to revert to 4.74% from 1 November.

    Sorry for confusing you, I make sure I keep in the bank what I would be paying if it was P&I (have a spreadsheet) so I know how much in my offset is my mortgage and what is money I have saved on top of this – if that makes sense. So me changing to P&I will not affect my living etc.

    Unless I can get a far better investment P&I loan rate with other banks (which my broker said not really), then it probably makes sense to stay with Suncorp and change it over to P&I.

    Thanks

    Debbie.

    • This reply was modified 1 year, 6 months ago by Profile photo of Debbie Debbie.
    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    Hi Debbie,
    In case you weren’t aware, propertyinvesting.com itself works with a finance group to get really good deals. I don’t know what they are right now, as the recent APRA changes may have changed things. Suffice to say that Steve mentions he can source a great rate based on the size of the membership of pi.com.

    Go here to check it out:-
    http://www.PropertyInvestingFinance.com

    A few months ago they were showing rates in the 3’s. Give them a call to see what can be done today,

    Regards,
    Benny

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    You can still get sub 4% on P & I investment loan at 80% lvr.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of JaxonJaxon
    Participant
    @jaxona
    Join Date: 2014
    Post Count: 282

    agree with the boys, you can likely beat 4%

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,065

    Hiya

    If you have no intention of purchasing an owner occ in the future – and if cashflow enables it then I’d consider going down the P&I path.

    With the rate difference between P&I and IO widening these days – you’ll probably find that the monthly repayments aren’t going to be drastically different (depending on how long your previous IO term ran for).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

Viewing 9 posts - 1 through 9 (of 9 total)

You must be logged in to reply to this topic.