Principle & interest OR Interest Only

Viewing 6 posts - 1 through 6 (of 6 total)

Starting Out
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@starting-out
Join Date: 2003
Post Count: 8
March 22, 2004 - 5:19 am
I am after some tips on whether it is a better idea to pay an investment loan on Interest Only, or Principle and Interest.
Thanks!
woodsman
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@woodsman
Join Date: 2004
Post Count: 714
March 22, 2004 - 5:26 am
You say tomato and I tomato….Seriously, I don’t think there is a right or wronf here.
Personally, I am looking to expand my portfolio and have decided to pay interest only. I am comfortable with assuming increasing amounts of debt. Others however, psychologically, like to know they are paying it down.
Admittedly, in the first few years, a very samll proprtion of the amounts you would be paying off would be principal. I gave one of my loans as an example on a similar topic last week, where on my $257k loan, P&I is around $1650 and I/O is about $1380. $270 isn’t huge, but I would rather have access to this in conjunction with other savings to be ready for next IP purchase.
From a financial viewpoint, I really don’t think it matters greatly.
James
Mortgage Hunter
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@mortgage-hunter
Join Date: 2003
Post Count: 3,781
March 22, 2004 - 7:46 am
Do you have any other debt?
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
FYI
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@fyi
Join Date: 2004
Post Count: 27
March 22, 2004 - 8:56 am
Simons question is the key.
It is nice to get a tax break by structuring investment debt as an interest only, buyt if it is yoru only debt, why not pay it off?
You can always re-gear into another investment if you get worried about your tax debt. Plus you are not solely relying on capital growth to make a profit. At the end of the day we are all trying to stretch the gap between what we own and what we owe.
Let the tightness of your budget decide what is the best repayment for you.
[email protected]
redwing
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@redwing
Join Date: 2003
Post Count: 2,733
March 22, 2004 - 9:45 pm
This question should be a ‘STICKY’ [biggrin] As it gets asked that often…
Ipop..
Depends on your situation and what your plans are, it’s a pretty Broad question you’ve asked and given no details, with some more details, i’m sure most of the brokers here could give you a better viewpoint..
PS-I have IO on My IP’s.. fixed it a while back..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
CastleDreamer
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@castledreamer
Join Date: 2003
Post Count: 288
March 25, 2004 - 1:18 pm
If you have a mortgage on your own home, pay that off first – as interest repayments on that are nondeductible. Do IO on the investment, and put the P bit that would have been on the Investment onto the home loan to pay it down quickly
Cheers
CD
CastleDreamer