Interest only Loans?

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

emong
Member
@emong
Join Date: 2004
Post Count: 2
October 25, 2004 - 7:01 am
Hello everyone,
i am very new to all this property investing and are finding this site very useful.
I was wondering if anyone could help me understand about Interest only loans a bit more.
From what i gather you get a loan and pay off the interest over around 5 years, then the value of the loan is due. is that correct.
Also how much would the monthly payments be on say a $100k loan (can’t find any calcs out there)
Are these easy or harder to get than a standard home loan?
I was going to make an appointment at the bank and see what they had to say, but i thought i would ask here first.
Thanks for the help!
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
October 25, 2004 - 7:18 am
Hi
I think you mean Interest Only loan??
With IO loans, you pay off the interest monthly over 5 years (usually) and then after 5 years, you can either, take another period of IO or the loan will convert to principle and interest (PI) over 25 years.
The interest is calculated by the interest rate x the loan amount, divide by 12 to get a monthly figure – this could vary depending onthe number of days in the month.
Terryw
Discover Home Loans
North Sydney
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Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
emong
Member
@emong
Join Date: 2004
Post Count: 2
October 25, 2004 - 7:41 am
Haha, yeah, i meant interest only loan. sorry about that, i fixed it up.
Also wondering if the interest rate is normally the same as standard home loans?
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
October 25, 2004 - 8:10 am
Yes just the same.
It is the same loan. Just that you don’t need to pay any principal for the first five years.
So you apply for a variable loan and tick the bos saying IO and write how long you choose the IO period to be. Total loan term will still be 20-30 years as you choose.
Simon Macks
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Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
October 25, 2004 - 11:13 am
And another point, most variable loans allow you to pay extra without penalty, so you may as well get IO and pay the principle if and when you chose.
Terryw
Discover Home Loans
North Sydney
[email protected]
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
redwing
Participant
@redwing
Join Date: 2003
Post Count: 2,733
October 25, 2004 - 12:42 pm
Interest Only loans mean your paying the interest and the principal amount stays the same, the extra cash you save however could be put into a ‘sinking fund’ or used to pay off your PPOR (non deductible debt) your tax returns also get put into here..
decreasing your non-deductible debt as fast as possible is the way for me (and as i have a L.O.C the funds are available to me for further investing or an emergency if i need them).
When the IO loan is due in 5 yrs the i’ll re-evaluate my needs at the time.

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