My 2 IP’s are LOC and we pay the interest amount only each fortnight freeing up more cash which in our case helps pay down our PPOR. The loans are for $280k & $270k which are kept at maximum and no extra money goes into this account and we never take money out. Is this the best type of loan for our situation?
Must admit i would never recommend an LOC for a standalone investment loan.
These should be IO Term loans.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
That's what the bank recommended as they were both previsouly P&I.
Ok good for once i actually agree with the advice a Bank has given you.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
pauln wrote:That's what the bank recommended as they were both previsouly P&I.
Do you mean the bank recommended the loans be set up as LOC?
This worries me.
And why are you paying fornightly?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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I asked for IO loan and they advised that they only had LOC. I pay fortnightly because its easier to budget that way. Have I got this set up wrong?
You are losing tax deductions by paying more into the investment loan. This means you will be paying more interest on your PPOR debt which isn't deductible = losing money, although probably not much.
What is the rate on the LOC? They are often higher.
A LOC can be used like a IO loan. Just make sure you never deposit anything into the loan other than the monthly interest charges.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
LOC is 6.6%
Should I change from fortnightly to monthly payments?
Is there any benefit to change to a new IO loan at a different bank?
And should I change my PPOR P&I loan to IO loan with an offset account at the same time?That rate is a bit high – how much is the loan amount?
Would be best for you to pay the min on the investment loan and any excess to the PPOR loan – so this means monthly, otherwise you would be making an extra month's payment to the IP each year.
If your PPOR would become an IP in the future then probably best from a tax POV to change it to IO, but this also depends on your spending habits. Some would be tempted to spend money in an offset account.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Apologies i read it that the Bank had recommended IO.
Terry is correct start to panic with this level of advice.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Terryw wrote:That rate is a bit high – how much is the loan amount?Would be best for you to pay the min on the investment loan and any excess to the PPOR loan – so this means monthly, otherwise you would be making an extra month's payment to the IP each year.
If your PPOR would become an IP in the future then probably best from a tax POV to change it to IO, but this also depends on your spending habits. Some would be tempted to spend money in an offset account.
IP#1 LOC Loan for $280K valued at $600k
IP#2 LOC Loan for $270k valued at $410kThose rates are a tad high for a overall loan size of $500k+. Have you spoken with a broker to see what they could do, if anything?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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