All Topics / Finance / Interest only loans

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  • Profile photo of modernARTillerymodernARTillery
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    @modernartillery
    Join Date: 2005
    Post Count: 5
    August 19, 2006 - 6:00 am

    Hi everyone

    As you can see I’m brand spanking new at this so forgive me if my question is cringe-worthy… What’s the go with interest only loans? I’ve been bullied around a bit by the lenders I’ve seen so far and they’ve told me that I can’t get one, yet I’ve heard so many people in investing talk about them. I’d greatly appreciate any advice I can get on this one! I’m looking to start my investment portfolio sometime next year and I’d just like to clear this issue up before I go and see any more lenders…

    Thanks,

    Modern ARTillery

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086
    August 19, 2006 - 6:31 am

    Hi Art,

    Unless things have changed alot lately in OZ you SHOULD be able to get IO finance (depending on your circumstances). PM one of the brokers on the forum, get a phone number and make some appointments.

    Io finance is a very valuable tool that you can use to keep the level of debt servicing repayments down while you are using the money saved for other investments in property or other assest classes.

    cheers

    I Buy Property http://www.cashflowproperties.co.nz

    Don Nicolussi | Property Fan
    Email Me | Phone Me

    Learning, having fun and doing it!

    Profile photo of modernARTillerymodernARTillery
    Member
    @modernartillery
    Join Date: 2005
    Post Count: 5
    August 19, 2006 - 6:52 am

    OK so I’ll definitely make some more appointments. But can I only get the loan interest only for a set amount of years? In that case is the whole point to re-sell the property and pay off the loan before I have to start making payments on the principal? Sorry hope I make sense but as I said I’ve kind of had my confidence battered a bit. I’ve read heaps of books on property investing but have so many people telling me that I can’t do what I want to!!

    Profile photo of v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871
    August 19, 2006 - 7:07 am

    Hi modern. Congratulations on making a start. A few years back the concept of an interest only loan made me laugh, as I only thought from the prospective of being a home owner, and of course interest only means you never pay off your home. For purely investment though, the interest only componant of your loan is tax deductable (against the rental revenue) whereas any payments made off the principle amount are not. Naturally, if you have money coming out of your ears paying off houses is great of course. With the interest only loans the paperwork will usually show that you have a period of interest only (eg. 10 years) followed by X amount of years principal and interest, (eg another 20 years) and then she is yours when you are old and grey! The idea being, as you said, after the interest only period you can sell, refinance, or do something else that you probably have not even thought of at this point….with the idea that what you bought the house for, and have not actaully paid any off, is a small amount compared to what your house is currently worth. As far as banks/others saying you cannot get IO loans, all I can think of is that the very cheapest loan pacakges/interest rates sometimes do not allow this, but other than that you have the choice. As DLPP said, see a good broker, or non-bank lender, they will help if you have no joy locally where you are. All the best!

    Profile photo of modernARTillerymodernARTillery
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    @modernartillery
    Join Date: 2005
    Post Count: 5
    August 19, 2006 - 7:34 am

    Thanks ghia that was extremely helpful![exhappy] Now I’ve just got to get started…!

    Profile photo of nordicskiernordicskier
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    @nordicskier
    Join Date: 2004
    Post Count: 85
    August 19, 2006 - 7:39 am

    Why go to a lender when you can get the brokers to do the leg work for you?

    Profile photo of modernARTillerymodernARTillery
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    @modernartillery
    Join Date: 2005
    Post Count: 5
    August 19, 2006 - 7:45 am

    Any recommendations nordicskier? I’m in Victoria so not sure if you can help me out any more than that.

    Profile photo of nordicskiernordicskier
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    @nordicskier
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    August 19, 2006 - 8:17 am

    modernARTillery – check your private messages for reply

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024
    August 20, 2006 - 9:09 am

    Hi ModernArt

    Most lender will initially offer an interest only loan for a specific period of time namely 5-10 years and then at the expiry of the interest only period will renogotiate with you for either another interest only period or get you to start making Principal & interest repayments.

    There are many reasons why as a borrower you would look for an interest only loan and the reasons will difer dependant on whether the property is being used as a PPOR or IP.

    Get you broker to assess your requirements full in making a recommendation which is right for you both now and for your future goals. I have many clients in Melbourne so feel free to ask as many questions as you like.

    Cheers

    Richard Taylor
    Residential & Commercial Finance Broker
    100% Finance on selected properties in the USA.
    Email us to be added to our mailing list.
    [email protected]
    Ph: 07-3720 1888

    Richard Taylor | Australia's leading private lender

    Profile photo of moroccomorocco
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    @morocco
    Join Date: 2006
    Post Count: 5
    August 24, 2006 - 9:53 am

    I have found that interest only is the way to go especially with the ofsett accounts .
    check your messages as i found a good deal

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