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.
Debbie.Tony FlemingParticipant@the-dark-knightJoin Date: 2008Post 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?
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.JaxonParticipant@jaxonaJoin Date: 2014Post 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)
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.
BennyModerator@bennyJoin Date: 2002Post Count: 1,376
- This reply was modified 2 years, 3 months ago by 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:-
A few months ago they were showing rates in the 3’s. Give them a call to see what can be done today,
BennyRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,018
You can still get sub 4% on P & I investment loan at 80% lvr.
Yours in FinanceJaxonParticipant@jaxonaJoin Date: 2014Post Count: 282
agree with the boys, you can likely beat 4%Jamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
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).