Can anybody tell me, when borrowing from banks or Credit Unions (investment Loan) for a rental house, do the repayments begin right away or can they be deferred until the completion of the house (building a new house)? Does anyone know of a loan with this type of structure?
LesleighGenerally they must begin straight away – within a month.
If you have enough equity, it may be possible to let the interest accumulate, or capitalise, but you would then be paying interest on interest.
Terryw
Discover Home Loans
Parramatta
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As Terry said, the payments will usually begin at the end of the first payment period (f’night/week/month). However, the payments are calculated on the debt outstanding, and if you are building, the bank will usually only pay the loan out in stages. In this case, you will not be paying for the full debt until completion and final payment – your payments will just increase gradually through the stages. There may be other ways of doing things, but in my experience, this is fairly normal.
Cheers, F.[cowboy2]Hi Terryw and Fountain
We thought that this would be the case. Thanks for your help.
LesleighIf you have enough equity in the property you could possible set up a 100% offset account, borrow the amount you will need for payments or interest only during the construction period and use that instead of having to make the payments as you go yourself out of your own funds. This will mean that you are not paying interest on the whole amount as you go. (i hope i have made sense – if not email me and i will try to explain in plainer English)
I normally recommend Suncorp or Commonwealth Bank for construction – they (along with a some other lenders) will only make you pay interest only payments as you draw down during the construction period. Some lenders make you pay principal and interest on the end debt from the first draw down which can make things tight.
Anita Marshall
Advanced Finance Solutions
http://www.advancedfinance.com.au
[email protected]Thanks Anita, that’s interesting to know. We are thinking of going through Credit Union Australia (CUA) so we’ll ask them if they offer this as well.
Lesleigh
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