Principal and Intrest..

I reckon interest only loans are the way to go for 99% of all property purchases inc PPORs.  Combined with a 100% offset they are hard to beat.

Prepared to argue this one with anyone

Cheers,

Mortgage Hunter Is right

offset accounts are a powerful tool,  with the right srtatergy you can knock years of your loan and maintain the maxium amount of your debt as tax deductable debt.

An offset account is an account which instead of earning interest the money that is in the offset account saves you interest on your loan, for example if you had a $100,000 loan and you had $2000 in your offset account you would only be charged interest on $98,000,

below is an answer that I posted to another thread to answer "show me the money's" question on this topic, I couldn't be bothed re typing another indepth answer so I have just cut and pasted the responce I wrote for her.

To answer your question 'Show me the money"

using your example, yes your payments would stay the same if you had $10,000 in an offset account. So you would still have to make your payment of $1000 a month, However because you have your money in the offset account each month you will get charged less interest, so more of your monthly payment will be coming of your principle there by reducing your loan term.

for example say for the month of june you didn't have any money in your offset account and you were charged $970 interest your monthly payment of $1000 has only reduced your loan balance by $30,

But then in July you hold $10,000 in your offset account so you only get charged $920 interest, ofcoarse your payment will still be $1000 but this month your loan balance is reduced by $80 instead of $30,
 
as you can see it has had a big effect, simply by holding $10,000 in your offset account for a month, plus it works like compound interest in reverse. If you think about that interest that you saved has reduced your priciple of your loan, so you might look at it and say "oh, good I saved $50 worth of interest" but really if you loan term is 25 years you have not only saved $50 interest but you have also saved 25 years worth of interest you would have had to have paid on that $50 if it were still on your loan.

Probably nearly all of them do.

Hi! All

Just wondering if any one knows about Meridian Money & how are they?

Cheers

Hi Hannah
 The 2 personal loans have higher interest charges on them of probably around 12:5%p.a  were as the investment home loan should be around 8.07% just a guestamate
   example  cost of personal lone  to  home loan. …12.5% – 8.07% = 4.43% higher .

 So  in a months  time when you pay off the first personal loan, you will have those repayments no longer needed  as extra cash each month.  A good idea would be to add the amount you were paying off the first loan  and add it to the amount you are paying on the  second pesonal loan,(  so you reduce the loan with the the higher interest rate first.) and pay twice the amount or more on the repayment amount  to the second loan. the sooner you wipe off this debt the better. 

  Also ask your lender if you can set up a 100% offset account over the home loan (investment) and put the $8,000 and any income from  investment and all  other income i.e wages  bonuses tax refund ect into this account , so you reduce the interest on the investment loan, pay just the minimum  monthly/weekly amount on the Home loan and maximum amount on the personal loan untill you wipe out the 28k personal loan.
   If you can pay more off the personal loan all the better as getting this loan paid off should be your No 1 Priority !.  When you do wipe it out ..start saving the amount you were paying on the personals loans into the offset and add it to what you should have then accumulated( hopefuly)  and search for your next  positive cash flow IP.
Most offset  accounts come with visa debits A,T.M card and no monthly account Keeping fees and also if you always choose credit when paying FTPOS  and pay bills on line (BPay Inter Net) from the offset account you save a little more.
 
  I think if you wrote on your loan contract that the purpose of the loan was to invest, then you should also be able to offset the interest  from that personal loan on taxes as it was borrowed for an investment not personal use.
Im not an expert and there are many ways to look at this problem, so check with your accountant or a professional investment adviser for more accurate info.

Hope this helps 

Thats what I was thinking aswell, but maybe personal loans have problems with lump sum payments, I don't know.

Slam the higher interest rate loan off, with lump sum, and with max repayments, get an offset for house(investment), pay minimum off house when paying off personal loan, then once personal loans are done you can move to doing the same to the house and searching for another IP as your equityin your home(investment) rises quickly.

Hi all,

I am thinking about investing aggressively in property over the next several years.

My plan is to change all of my residential loans (deductible and non-deductible) to interest only to increase my cash flow. My non-deductible loan has a 100% offset attached to it, so I plan to pool all of my funds into this account, which will also have the benefit of reducing the loan on my PPoR.

My questions are:
 
1. Does this sound like a reasonable configuration to increase cash flow in order to maximise my property investment potential?

2. How do other investors in this forum structure their loans?

Thank you so much for the above advice on "the order of dealing with debt".  I feel confident to work hard on paying off the non-deductible debts and open a offset A/C to put any extra income when it appears……………..

Wanting the best of both worlds…………….!!!

I still want to reinvest in another positive geared property.  We have the financial position in the banks eyes but not the deposit for the closing costs; about 25K

We have 10K but want to use this to pay off our personal loans before anything else.

Westpac advised me that I can "Top Up" our first home loan by 25K without any extra charges eg: breaking loan charges. BUTTTTT I would have to break out of our "fixed" interest 7.35% rate to "variable" 7.58% !  Because our loan will then exceed $250K the interest rate will be discounted to 7.36%, but still variable.

Please help me.  what are the dangers of changing from fixed to variable interest rate.