Hello,
I'm earning just over $50k/yr atm. My borrowing power for outright mortgage is limited, so I was woundering if I buy investment property – can I borrow more under one of those interest only repayment loans?
Thanks@!
Yes, interest only loans are avialable for owner occupiers and investors. Remember rental you receive (or estimeate of what you will receive) goes towards your assessment as income (approx 80% of it). All the best.
Not really. Many banks still assess you on the PI repayments – at a higher rate usually. But you can take into account potential rent for the new property which can make a big difference – and some banks allow you to take into account depreciation and interest deductions.
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
Sorry V71 – unless you edited your question, I misread it and Terry's reply is correct – your actual borrowing 'power'/how you are assessed is essentially no differernt whether you are P&I or interest only – but as mentioned, you can borrow interest only without being for 'investment'. All the best.
Yes, that answers my question – so same borrowing 'power' under either option, thanks!
I thought you can only borrow interest only if it was for investment? Or is it the other way around? Or you can do it either way?
What are the benefits? Long/short-term losses?
Thanks.
You can borrow PI or IO for most puposes, it doesn't need to be for investment.
Benefits – lower repayment on IO (based on the same amount borrowed as you are not contributing to the repayment of capital) Disadvantages – you will need to refinance for the same amount at the expiry of the loan/no reduction in the balance owed. Asset value may not increase so your borrowing capacity may decrease, if you borrow for non-investment purposes the cost of loan would most likely be non-tax deductible.
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