Hi
This is one for anyone who has taken out an interst only loan before. Once you have the loan can you make payments to reduce the principal at any time thus reducing the interest amount or are you locked in to paying the interest only. ( i know this sounds like a stoopid question as interest only implies just that.)Cheers
Ms Elvis
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]Hi again Ms Elvis,
You’ll have to read the fine print on the loan document as to whether you can make extra payments or not – it should be clearly spelled out for you, it’s just a matter of finding it amongst the many clauses.
Dianne
“Make a decision, take the risk, pay the price, or reap the rewards”
Most variable rate interest only loans allow principal repayments. Some products specify a minimum payment (e.g. minimum principal repayment of $1,000). Best to check with the lender/broker/loan documents.
I often recommend investors to elect to repay interest only even though they may want to repay P&I. This way they can make regular P&I repayments but if cash flow gets tight they can always reduce the minimum repayments to as low as interest only.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Ms Elvis (maybe that should be Priscilla). I have some P&I loans and some interest only loans. With my I/O loans, yes, I can make extra payments but unless you are paying a substantial amount it wont make a lot of difference. For example, if you had an I/O $100,000 loan at 6.5% your monthly repayments would be approx $541. If you paid $1000 off that loan, your new monthly repayments would be approx $536. Not a great deal, but I suppose every little bit helps. Speak to your bank/broker if your loan allows you to do this. Hope this helps.
Marty has left the buildingHi,
I know the Commonwealth Bank allows you to pay off 10K a year off interest only loans.
Cheers,
Benson
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