Interest only loan for 11 yrs so far but how long can it go on?

[donkey]

I took out my 30 yr loan at one of the 'big 4' banks in 2002 interest only and they have been renewing it every 5 yrs.

My I.P has doubled in value and I have solid repayment history. The current interest only period expires in around 3 yrs.

I want to hold onto this I.P for another 20 yrs to finance my old age and dont want to ever pay P&I because I live abroad and need strong cash flow to support my travelling lifestyle.

I'm aged in my early 40's and wanted to ask if anyone knows what the general policy is regarding Interest only loans. Will the bank continue with Int only until the end of the loan term. Or will they at some stage look at my age and the loan balance and make me commit to P&I?

The loan is around $190k and property is valued at $550k now and thus security is not an issue.

If they do make me change to P&I I realise that I could re-finance. The problem I have if that due to my travelling lifestyle re-financing might be difficult. I will have the $480 pw rent and earn around $1800 pcm interest from my online saver but it will still be hard for me to get finance I think

I appreciate any opinion from lenders or mortgage brokers on my situation

 

[Aaron_C]

Eventually it will revert to P&I since your loan term now will be pretty short. Perhaps explore refinancing it at the end of the term or even now to a 15 year interest-only with another lender.

 

[Colin Rice]

If they do make me change to P&I I realise that I could re-finance. The problem I have if that due to my travelling lifestyle re-financing might be difficult. I will have the $480 pw rent and earn around $1800 pcm interest from my online saver but it will still be hard for me to get finance I think

Should be doable on that income to look lock it in for a 15 year IO term.

 

[Rolf Latham]

some lenders are quite pragmatic about extending the IO term especially where the paper based LVR is lowish.

For eg
Have had clients with 15 years IO done at WBC who were provided another 5 no probs, and in general physical age of the borrower isnt that critical.

Then you get other lenders tell you that IO over 5 years is illegal

ta
rolf

 

[joanmc]

Would it also be possible to convert to a LOC? or do the banks make you convert them to P and I too eventually?

 

[Rolf Latham]

Would it also be possible to convert to a LOC? or do the banks make you convert them to P and I too eventually?

LOC is good and well IO for ever with most lenders

Caveats:

1. They have no fixed term, so are technically reviewable regularly
2. Many contracts have repayable on demand clauses
3. LOC in general isnt a good product for long term "hard" debt
4. Rates can be a little higher.

Im not down on LOCs, in fact we use them a lot on the financial planning side of the business, and where clients want to capitalise interest or costs, its just that I believe they are oversold for resilient debt use.

ta
rolf