Does Steve recommend interest only loans or P&I

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Rocket
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@rocket
Join Date: 2003
Post Count: 4
October 12, 2003 - 3:30 am
After just finishing Steves book, i was wondering if he favoured interest only or P&I finance?
I guess the 11 second rule will only work with an interest only loan?
Is it worth paying off any capital?
Your thoughts please?
Thanks
p0sitiveCasHfl0w
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Post Count: 133
October 12, 2003 - 3:47 am
Hello Rocket.. This was Steve’s response on that issue when interviewed by Today Tonight… Hope this helps..
Question: Which is better, an interest only loan or a principal and interest loan?
Steve McKnight: My grandfather used to say no-one ever went broke owning too little, and I’ve taken that advice. For me, principal and interest loans are a better idea. They might lower your cash flow return but this is because you are repaying debt, which is never a bad thing. You can always re-borrow it later.
The only time I do interest only loans is on the commercial property I own, and that’s because the bank will only offer me a ten year loan term. If I did a 10 year principal and interest loan, it would be largely negative cash flow because of the requirement to pay back the debt. That’s why I do interest only.
Cheers,
Jay
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You must stay pOsitive
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peterp
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October 12, 2003 - 4:31 am
Wow, that’s a deep question for TT ; )
quote:
My grandfather used to say no-one ever went broke owning too little, and I’ve taken that advice.
But did he really say that? I personally would rather owe little than own little!
Indeed with P&I you eventually will own much, whereas you won’t with interest only, unless you make other arrangements (eg hope for capital gain and sell a few properties later, as recommended by John Fitzgerald).
Peter
Mortgage Hunter
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October 12, 2003 - 4:52 am
Remember that most IO facilities are only five years with a few being longer. A LOC is IO for the term.
The average person with their 5 year IO term will still pay off the loan but enjoy lower repayments for the first five years – poss when cash is tightest!
It really isn’t a huge difference and is very much a personal choice thing.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.