I need advice on my mortgage?
What are the benefits of paying P&I versus Interst Only on an investment property that is currently negatively geared? Is fixing your mortgage for 1-3 years a good idea? Why? I earn a six figured salary…is there anything I should be considering when revising my mortgage product? ie the tax man
If you have any non deductible debt then I would suggest IO with all principal payments directed to that non deductible debt – the classic is the PPOR loan.
Remember that only the interest component is tax deductible.
If you wish to buy more property then IO so that your money can spread further.
Remember with IO you can make principal payments if you wish.
I am not a big fan of fixing. In most cases the borrower ends up paying more but there are winners – I am still paying 5.86% on the only loan I have ever fixed.
I am sorry I cannot give too much more advice without knowing your situation further.
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
There are no benefits of P&I versus interest only that can not be bettered by using an interest only loan with an offset account if you want to reduce debt unless you are very bad with controlling your money. You also have the option of maximising deductibility at any time using IO with offset.
P&I should certainly never be used on an investment property if there is other non-deductible debt (eg: home loan, car loan, credit cards, personal loan, etc.).
P&I payments stay the same whereas IO payments can be reduced if you choose.
I am not a fan of fixing either as flexibility is extremely restricted and costs to change lenders are usually high. Some people do make excellent choices though as Simon has done with his loan.
If you want to reduce your debt levels, seeing you have such a high salary, I would suggest using an offset account. Direct all income and rent from investment properties and you will make good inroads into reducing debt.
Regarding tax, using an interest only loan will maximis deductions. Also, make sure you have a good depreciation schedule organised. Talk to the depreciator who posts on this website about that.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential LinksThanks for the advice that has pointed me in the direction I needed!!
Cheers
The Lexter
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