re paying down debt.
i know there are a lot of opinions re this subject and we all have one.many like the idea of being geared to the gills for lots of reasons, tax, asset protection etc,etc.
many like a lot of money as moneylenders too. plus this can all be justified in some ways.
it is a personal decision. i dislike paying more than i should/need for anything.
i resented paying interest but understand why its necessary to get property and i understand the tax benefits of it too.
however it was lovely to be debt free and have freehold property.
it depends on your stage of life too. why pay more than you have too?
many will disagree and thats ok. but if you can achieve peace of mind do whatever makes you happy.
the moneylenders do not want you to be debt free its their business.
Number 8 – your right about some of the benefits but people have different goals.
Personally I have About 4 years to finish paying off my properties.
All I want to do is pay them off and collect rent, along with trail from my mortgage book. I don’t have any desire to drive nice cars – would rather live by a beach and surf every day. Work a day or two a week if I need to.
Like a lot of people I couldnt give a damn about having 20 properties –
why should I stay interest only?
I’d rather have my titles at home than funds available in offset.I prefer to do interest only as it helps with servicing your loans allowing you to buy a lot more property.
Agree with all,
As stated its a matter of Horses for Courses.
If you are a go getter then go interest only and max out – hope that capital gains brings in the big bucks.
If you are cautious and like to sleep at night then go P + I and make some slow gains.There is no correct answer, its easy to be correct years down the track, but what if property crashed and you lost your wages, had an accident etc.
WJ Hooker wrote:Agree with all,
As stated its a matter of Horses for Courses.
If you are a go getter then go interest only and max out – hope that capital gains brings in the big bucks.
If you are cautious and like to sleep at night then go P + I and make some slow gains.There is no correct answer, its easy to be correct years down the track, but what if property crashed and you lost your wages, had an accident etc.
This is where you have it a little incorrect….
Sleeping well at night is much easier on I/O then P&I. And please do not label people as a GO GETTER…….Why? Do the numbers….
You will find that by purchasing two properties under a I/O structure is better than one property under a P&I – both in terms of cash-flow and growth…… Do not simply follow popular opinion and plaster comments over the forum that cannot be substantiated due to your own fear. Substantiate with fact as opposed to fluffy comments that are what our Mum and Dad's have told us. To be frank, if I listened to this hogwash, I would not have retired at 34. Further When MUM and Dad Australia go to sleep at night with a reasonable P&I mortgage, and wake up in the morning without a job for one reason or another – I consider this risky……. But when I go to sleep and wake up without a job (while I am interest only) I will get my tenants to foot the bill, I will also have equity from the properties to fall back on……. Oh but you are happy to have Mum and Dad lose there property to the bank…….. Be careful about the advice you give, you must be able to substantiate your advice???
And YES not everyone wants the best out of life, or wants to retire young, or wants extra cash to live off, or wants spare cash to buy items as they wish…….. So those people need to hang around you……….that is unless you are just jumping on the wagon of of common opinion and fear responses…..
I am quite happy to sit down with you to show you how my life has FAR FAR less risk than you with a P&I strategy…the question is would you show me how P&I is better for me?
Once again P&I is a strategy that should be used in very limited circumstances (like lack of discipline). But to use it to sleep at night is effectively negative to the argument. Lets Compare: Mum and Dad 1 (M&D1) v Mum and Dad 2 (M&D2).
M&D1 pay P&I on a $350K loan- wake up with no job due to sickness etc, who pays the next months payment? OK, you can chip in here as you gave the advice????? Yes income protection can save you from sickness- but not lose of job.
M&D2 pay I/O on a $350K loan (Extra money is put into an offset account)- wake up with no job due to sickness etc, who pays the next months payment? Well that is a simple one………. The money is in your offset Acct , WOW! I am now in a happy place! This is commonly called a buffer, this coupled with income protection puts me in amongst the least risky property owners in the country………
The next step is to purchase an investment, as you have established your cash-flow and equity, this will further reduce your risk, i.e. an extra income source. That is increasing with inflation.
WHAT IF PROPERTY CRASHES, was your next issue? Given that you have extra money in the offset account, you can now afford to buy property at the low point of the market? That to is favourable……
http://www.birchcorp.com.auLeigh, there are a lot of assumptions in your argument. You assume M&D 1 have no other money out away to cover the loan, and you assume M&D 2 are religiously putting money into their offset account. You also assume that your situation has less risk than WJ, when you don't know the first thing about his(or her) circumstances.
What is WJ's LVR? How many properties? Where are the properties? Other income? So how can you make that claim based on so little information?
We all now know your preferred position, and by and large I agree with you. But you do yourself no favours by reacting to contrary opinions like you have to poor old WJ.
So my advice, calm down, lay off the coffee and enjoy retirement!
Cheers,
Dan
This is a critical argument to the whole banking and finance, and the Mum and Dad mortgage situation in Australia that is often misguided with fear comments. It is important to understand that the common belief of our parents are not exactly correct.
It is definitely not coffee talking……. but a defense on an important issue that requires addressing.
My objective is to show people another way,
Your right WJ is in the firing path, but surely you do not anti-respond without having a think about your response.
and YES there are a lot of assumptions, but I have not the four hours to clarify all the assumptions- life is full of assumptions…
MD2- are clear as they are disciplined- I covered this one off.But you are right, enough said, I'm going for a swim….
Life is full of assumptions?? My point was that you can't be sure of your position (less risky than WJ's) without at least some other information.
Saying P&I is more risky than IO is neither true or untrue, without the other information. As a financial planner, surely you wouldn't give advice based on assumptions about your clients, you'd gather as much information as possible. At least I'd hope so!
Again, I agree with your basic premise that IO is the way to go. But all we can do as advisors is show people how we believe it should be done. If they go down another path, the that's their choice. It's not right or wrong, necessarily. Just different.
As mentioned above, I would not give advice making assumptions – I wrote: "but I have not the four hours to clarify all the assumptions"
The point that everyone is completely different, is clear to me, that is why I stated in an earlier post people cannot plaster items such as "go getters" and/or "cautious and like to sleep at night", you must substantiate, not give advice around items/ topics that may or may not be correct. What you are saying to me is eaxactly my point I am making on this thread.
I think we are discussing the same thing????? Where did you get Leigh from?
I thought I read one of your posts from earler today and it was signed Leigh, although I can't find the post now. Apologies if I have got this wrong.
I think we are on the same path, I may have handled it a bit differently, that's all.
Enjoy the swim….
Cheers,
DanYour right, Leigh it is…. just curious.
Dan, On another topic- read my letter on the thread "Advice needed about bank fees" What is your thoughts? as I mentioned earlier, I am off for a swim now, but I would like to here from you in regards to this………
Please criticise/ breakdown as appropriate….. Thank you in advance……
You must be logged in to reply to this topic. If you don't have an account, you can register here.
