All Topics / Finance / Use of interest only loans

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  • Profile photo of jagavranicjagavranic
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    @jagavranic
    Join Date: 2003
    Post Count: 5
    February 11, 2004 - 3:00 am

    Hi guys

    I am new to this forum thing but I am looking for some advice.

    If you were to purchase a positive cash flow property in an area which experiences minimal capital growth, is it:

    1. better to take out an interest only loan and have more in your pocket now for increasing your property portfolio; or

    2. purchase with a principal & interest loan and eventually own the house outright?

    Advice is greatly appreciated[:)]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    February 11, 2004 - 3:39 am

    It is a personal choice really.

    However, if you currently have a loan on your home, why not divert extra payaments into this rather than paying off a investment property.

    BTW would it be wise to purchase such a property?

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of GeronimoGeronimo
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    @geronimo
    Join Date: 2002
    Post Count: 167
    February 11, 2004 - 10:19 am

    HI

    Interest only also doesn’t necessarily mean that you cannot pay off principle, but it does give you the option not to if you want to allocate the surplus funds elsewhere such as Terry has suggested.

    Regards

    Brendon
    Acute Mortgage Reductions

    Profile photo of jagavranicjagavranic
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    @jagavranic
    Join Date: 2003
    Post Count: 5
    February 12, 2004 - 2:17 am

    Thanks for the information guys.

    Profile photo of MarksieMarksie
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    @marksie
    Join Date: 2004
    Post Count: 4
    February 12, 2004 - 10:33 am

    WE are going though the same problem, the only properties we can find are in rural areas that have very little capital growth. Terryw said would it be wise to buy such a property, my question is what other choice is there[?]

    LISA MARKS

    Profile photo of jagavranicjagavranic
    Member
    @jagavranic
    Join Date: 2003
    Post Count: 5
    February 13, 2004 - 4:41 am

    My belief is that it is wise to purchase in these areas provided you have done your homework and are comfortable within yourself that you can sustain your positive cash flow in the area.

    At the end of the day, provided you are getting PCF and your tenants are happy with the service you provide, then the capital gain shouldn’t matter too much (although I would prefer a capital gain!!!).

    Any other thoughts ??? [?]

    Profile photo of MarksieMarksie
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    @marksie
    Join Date: 2004
    Post Count: 4
    February 14, 2004 - 10:12 am

    Hello Jagavranic,
    I’m pretty new at this game to, but it seems to me that all the positivly geared homes are in the outback.
    But i agree with you as long as the rent covers all your costs how can you go wrong.
    Good look with it all!
    Regard Lisa[:)]

    LISA MARKS

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