Hi Guys,
When purchasing an IP which your to use as a rental is it best to go with an Interest only loan, of principal and interest loan?
The loan I’m looking at is a 3 yr fixed loan.
I actaully plan to refinance the loan after the 3 yrs.
This won’t be a positively geared rental.
Cheers
Wayne
Wayne Leech
*Below are links to my websites – any feedback, comments would be appreciated:)
http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
http://www.homesearcher.com.au – List your property for FREE (Private sellers only)IO would be better if you have other non deductible debt.
If none, then it won;t really matter too much. Having IO will increase you cashflow – allowing you to invest in more areas.
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
What if Wayne wants to keep the IP indefinitely, would he not be better off on a P & I loan to reduce the debt, and have it paid off in the end, as opposed to IO for years and then be forced to sell (it or another) to pay off initial loan amount (capital)???
Jo
Jo
It all depends. If he had IO loans, he could afford to own more properties (as the repayments are cheaper).
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
Hi Guys,
Thanks for your feedback.[biggrin]
Yes, Monolopy – that is my plan. I’m actually thinking of combining and refinancing my current rental in with the new loan for this new IP.
In 2-3 years I then plan to refinanace against these two properties to build another house.
Therefore – my long plan is to keep these properties.
– Wayne
Wayne Leech
*Below are links to my websites – any feedback, comments would be appreciated:)
http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
http://www.homesearcher.com.au – List your property for FREE (Private sellers only)Hi guys
If you still have debt on your own home the best thing is to pay it down first as interest isn’t tax deductable on your own home. (what terry was saying)
The way i look at is if i pay off the principal then in effect i’m getting a 7% (or whatever interest rate the loan is) return on my money, if i think i can do better than 7% then i’d rather the cash, Personally i’d always choose Interest only because i think 7% return is a bit average.
regards westan
Okay, help me fill in a few gaps here….so Wayne, what you are saying is, you will refinance in 2-3 years against (by then) 2 IPs to buy IP #3, yes????? And then, do you plan to keep or sell #3 to pay for #1 & 2????????
I’m sorry if I sound a bit daft, just trying to get a clear mental picture, on what I think sounds like a great plan!!!
Cheers,
Jo
Hi Monopoly,
Yes, that’s right:) I plan to build a new home as #3 (on a block I currently have) then sell this one off to pay a lump sum off the mortgage for #1 & #2 – making them positively gerared:)
That’s the plan anyway[biggrin]
Wayne Leech
*Below are links to my websites – any feedback, comments would be appreciated:)
http://www.landsearcher.com.au – List your land for FREE (Private sellers only)
http://www.homesearcher.com.au – List your property for FREE (Private sellers only)Thanks Wayne,
Gotch ya!!! [winking]
Clear as crystal now….and may I say, IMO a brilliant plan!!![specool]
All the best with it; keep us posted, I personally will be glad to hear of your progress.
Cheers,
Jo
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