In the process of buying my first investment property which I am able to receive positive cashflow, so should I use a Interest only loan or Interest and Principle?
Generally speaking I/O with an offset is preferred by most investors and even home owners…however it will depend on your goals, plans, borrowing capacity and product/rate ( ie some lenders charge a higher rate for i/o…..and some products don;t allow for i/o at all).
If your not too sure what your going to do and have no short/long term goals etc…then stick with I/O with an offset it provides the highest flexibility and it’s hard to go wrong with that set up, especially if it;’s an investment property
Regards
Michael
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
One idea (or 2) behind using IO is to use as little cash as possible for investments so that:
1. You can pay off your own home sooner, and/or
2. Invest in more properties.
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
Personally I'm a fan of IO loans accross every property in the portfolio – even the PPOR. I wrote an article for API magazine on this recently – instead of copy/pasting, here's the link
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
My thoughts are that IF you own you own home outright and have no other non tax deductable debt then by all means go for a P&I loan as the idea to building wealth is made up of three key items; reducing debt, increasing income, and selling/locking in a capital gain or profit which in this case you can do the first two – any other situation I/0 loans make much more sense 99.999% of the time, both for tax reasons and flexiblity, as who knows what may change in your personal circumstances or property plans.
All the best
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