Does anyone pay off principal in IPs?

Yes, when it has been forced on me because of a high LVR.

It was my second IP, I was not a broker.

However, having the choice...certainly not.

Are you considering this?

Regards JO
 
The market isn't coming down. There is an inherent undersupply of housing here in Oz.
To me, it's all about leverage. I want to control the largest asset base I can with my (input) funds.
As the market moves up, the value of the property I control grows. My debt remains the same, so I get to keep the difference by way of selling or releasing equity through loan top ups or re-financing.
If I own (outright) a $500,000 property and it increases 10%, I make $50,000.
If I control a $2m portfolio (even though I only own 10% or 20% of it) and it increases 10%, then I've made $200,000.
$200,000 is a lot more than $50,000. I can sleep at night just fine :)
 
get the best of both worlds

get an 100% IO offset account and pile your principal cash into that.

More flexible and just as effective for accumulation.

ta
rolf
 
I am still struggling with good debt VS good night's rest if the market were to come down?

Like Hong Kong, Tokyo, and USA?

I'm sorry if I am not up to date on your other Threads, but have you an Offset Account or a Redraw Facility?

If your loan is IO and you would still like to pay everything you can to keep this loan down, then use these facilities. If it is your choice to reduce your IP Loan rather than the banks......you will have more flexibility if your cashflow becomes restricted.

Regards JO
 
am about to use it to purchase my 1st IP, probably crossed loan/interest only.......Which is better for longer term in the future?
 
I plan on paying all my principle someday. Not anytime soon mind you and on settlement of this property I will have a total LVR of round 92% :D but I can see the benefit of paying it down, depending on your overall investment strategy.
 
I've swapped houses over so the house that will be an IP is P&I and the house we are living in is IO and the fees are too high to make it worth changing. Just means the payments on the soon-to-be-IP are half interest, half payments.

I wonder if I can depreciate anything to make up for it ...
 
The bulk of my loans are IO, however I do have one loan that is P&I.

I personally like the idea of reducing debt over a looonnng period of time.

Each to their own I suppose. I hardly ever see many investors recommending P&I loans, maybe I just like to be different.

If I had any non-deductable debt (I don't), I would be attacking that loan first.

Regards
Marty
 
three of our IP loans are IO, one is P&I.
The P&I one is on a pair of retirement units, which although positive cashflow, don't have the same capital growth as the normal houses we have.
Paying them down means we get equity a bit quicker, and they pay for themselves even with the principal component.
Oh and our PPOR is P&I also.


ps had to re register as I lost my password and have a new email address.
 
I too like to reduce a bit of the debt so pay P&I off two of my IP's and interest only on the others. I dont really even notice it but over the years I have reduced my loan by almost 20k and can always get the equity out later.

Cheers
 
I too like to reduce a bit of the debt so pay P&I off two of my IP's and interest only on the others. I dont really even notice it but over the years I have reduced my loan by almost 20k and can always get the equity out later.
But you'd be better off parking those funds in an offset. If you need to access the funds again for private purposes, you lose deductibility if you've paid down the loan. When talking about $20K, not a big deal, but if the numbers get big and you want to buy a bigger PPOR (for example), it can hurt.
 
we are paying them off now but we don't have any personal (non-deductable) debt and nothing better to do with our cash at the moment.:)
 
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