Hi all,
What are your thoughts on interest-only loans? i.e. loans that do NOT require you to pay the principal component of a loan at all.
In the books I have read from Steve McKnight, most examples use Principal-based loans, when the owner is constantly paying off the loan during the course of X years (e.g. 30 years).
I understand that interest-only loans generally require less repayments, and therefore will this work better for a cashflow-positive property investment?
Your thoughts would be fantastic.
Regards,
AJayIf you have a home loan still it would be ridiculous to have a PI loan on an investment property as you would end up paying more tax.
Even if you have no non deductible debt it would still be a good idea to get IO for a number of reasons including:
– less repayments means less financial stress
– less repayments means you can buy more investment properties or other investments
– You can always pay the loan off as if it was PI and then revert if times get tough
– Money paid into the loan cannot be withdrawn to fund unexpected personal purchases without adverse tax consequencesTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd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
Thanks Terry. PI assume you mean Pricipal interest, and IO I assume you mean Interest Only?
So just to summarise, you believe the Interest Only loans are best for investment properites?
Yep
I personally like IO for all loans. But if you are not disciplined at saving etc, then maybe a PI loan is safer.
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
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