I am starting out investing with a small $75000 loan. Is it best to go interest only or principal and interest?
I would normally choose a P&I loan for a property I owner occupy and interest-only on an investment property as the interest payments are tax deductible anyway. That way, you can free up cashflow to get more property.
Disgree i would suggest IO for both.
What starts off as a PPOR may one day be a IP and the only interest that is deductible is the interest on the outdtanding balance. You are unable to refinance, redraw or claim a tax deduction against the funds borrowed against the old PPOR so IO with a 100% offset account gives you the flexibility you need now and down the track.
Richard Taylor | Australia's leading private lender
I agree with Richard,
Although it is good to remember and debt is worthy of being reduced if you can… ie we are always better off without the debt if we can help it. But Investment debt allows us to leverage.
When paying Interest only, you should remember that you can pay extra when you like … therefore treating it as a P&I but with the full access to redraw all principle payments unlike a true P&I. With the debt levels as they are, most people are unlikey to pay off their loans with savings anyway, therefore the idea is to hold and wait for the capital growth and being careful to maintain cashflow… hence the Interest only gives you the flexibility to increase or decrease payments with full redraw.
If this is your only debt … then it might be a good idea to set I/O and treat it as a P&I and pay it down as quick as it is possible for you, knowing the equity is therefore you to use again to maybe buy another property in the future.Maxxi
JJM Finance Services P/L
0403 234 234
[email protected]
8.77% Full Doc and Lo-Doc are about to arrive!!
You must be logged in to reply to this topic. If you don't have an account, you can register here.
