Hi! Quick question, a lot of people are saying that all your loans should be interest only and you should be cash flow positive but I am wondering how you stay afloat if you own 10+ properties and the interest rate goes up to say 10%? Stay in School for example must have a real problem if that happened since coming up with the difference in payments out of his own pocket over 13 properties while still studying must be a real concern? How do you get around that? What would Steve do with 130? Hear from you all soon.
You could fix a few or all of your loans, with varying number of years. But having IO loans will actually help. If rates suddenly jumped the extra repayments on a PI loan would be much more.
Terryw
Discover Home Loans
North Sydney
[email protected]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
May be Still In School should answer this question.
Where are you still in school?
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Ha ha Chan$$$ some people sleep some part of the night[|)] or even day[|)]
Hi Chan$
lol…, ive been at work, just finished up not long ago….
back to the question though, majority of my loans are P/I, though there is one property that i am selling soon which is on a I/O loan and that has plenty of capital gain (which was planned to be 1 year hold only), simply this property is going to be used as cash injection, though most the other properties were caculated with 1.5% – 3% interest rate buffer. Though if interest rates do go up to 10%, i have a strategy that will take place and will be able to ride out the high interest rises.
though currently still, i can get very competitive lower interest rates, but ask Chan$ he is also in the same preparation too…. [:p]
Cheers,
sisHey everyone ,
Great new site, love the changes!!
Scotty this is my doom and gloom plan… I am dumping extra money into all my redraws so that even at 10% i still have the same re-payments i have now. All my loans are IO, but i make my payments at the calculated P+I amounts,(go loan calculators!) so this way i still have a lower minimum payments if i really need them . To achieve this plan (but after much deliberation) i am selling one IP at a very nice CG of $100,000 after 12 months and lots of paint. My thinking being i can always buy more when the market drops again.Hi there,
SIS, I come from a medically orientated background, so could you please explain your meaning of ‘preparation’ because I think I might be on a different wave length on this one?[?] Also could you explain what “preparation” this is?
Ta
Sooshie [
]When a problem is created the solution is created simultaneously
Brown Rabbit,
Be careful of redraws.
If you use the money for something other than investments then you will lose the deductibility.
Offset can be safer.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
yeh basically what is cf+ today may not be tomorrow. the only way around it is to dump extra cash into the mortgage, which makes it like any other neg. geared property, just with a little less pain and arguably less capital growth as the trade off. There’s no way around it, if interest rates went crazy there are not many properties around that could leave you not having to top up a difference. The only consoling fact is that half of Australia would go broke so they couldn’t push rates that high in the first place. Plus rents may rise a little as investors flee the market and rental supply dries up. I say just do your analysis on todays numbers, protect yourself as much as you can and give yourself as much safety margin i.e. gearing ratio,as you feel comfortable with.
Different loans for different scenarios.
I have I+P loans, but my accountant wanted me to go with IO’s.I personally prefer to see a reduction in a loan. I wish to hang on for the long term, and I dont need any quick sales or cash injections.
My bank manager was happy with either…wonder why? LOL
I do not dump cash into investment loans, that defeats my purposes. I dump cash into my own mortgage. Saves me interest that isnt helped by MR TAXMAN.
I would use an offset account for my own mortgage, but not for investments.
As for interest, make sure you have room to move. And consider fixing rates, even if those are slightly higher, if say your income may be restricted and you have no room to move, means no nasty shocks for a period of time, downfall obviously is if rates drop.
But I’m ok mate!
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