Hi everyone,
I have only just started to some research into property investment and am trying to understand as much as possible before I go looking for some property’s.
I wanted to ask which are people using – interest only or interest and principal? What are the pro’s and con’s of each.
I’ve spoken to several different people who are recommending different ones.
Hi Curtis,
Just in case you didn’t find this oneA common question when investing is, “Why use IO loans and not P&I loans?” Click below to read on….
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697976Benny
Hi Curtis
Generally interest only – particularly if you have an owner occupied loan or other non-deductible debt.
If you have no other debt- then interest only is still usually best. Link up an offset account to the loan and park all your spare cash in there.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Your situation and what your plans are both now and in the future would really shape the decision to go interest only or principal and interest on your repayments. Do you have a strategy with your property investing? Each purchase needs to be fully evaluated for its use now and in the future.
Generally, going interest only is the best option for investment properties. Set it up with an offset account and park extra money in there if you wish.
I don’t necessarily subscribe to an owner occupied home being interest only though. The debt is non-deductible so why only pay the interest. Concentrate on paying it down. The only time i’d say go interest only on an owner occupied home is if your plan is to turn the property into an investment property within a short period of time. Keep the debt high so you have more deductible debt when it’s an investment.
Ultimately, at some point you should start to pay down your debt though.
Have a good one.
Interest only with offset leaves you with the greatest flexibility regardless of the situation. The only time I’d suggest it may not be the most suitable is if the borrower doesn’t feel they can trust themselves with large sums sitting in their offset without using it.
Counter to Mikal, I’d still say even in an owner occupier situation it’s not a bad idea if you may be an investor – you never know if you may make the existing PPOR as an investment property. I’ve seen too many young couples in particular upgrade from their first rung house and have a poorly structured setup from paying down their debt too much.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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