Interest only loan question...

[HLE]

One other thing to consider - With interest only,most investor assumes that the value of the property will go up and produce it's own equity. If the assumption is wrong and the value decreases it can be a significant setback if you are not able to hold investment for longer term.

 

[Bandita]

You can also have an interest only loan with an offset account attached. This means that you can put additional money into the offset account to reduce the interest charged each month. This gives you flexibility, as you can access the money sitting in your offset. If it is for an investment property and you use your offset money in future, it will mean you can still claim the interest on the full loan amount.

An offset account (IO or P+I) is definitely our preferred option If you want to reduce your interest overtime and you're disciplined enough, you can reduce your interest just as you would paying off your loan by instead putting the funds into an offset account linked against the loan - with the added bonus that you can pull those funds out at any point for any reason, and if it's an investment loan, the loan will remain tax deductible

 

[Colin Rice]

One other thing to consider - With interest only,most investor assumes that the value of the property will go up and produce it's own equity. If the assumption is wrong and the value decreases it can be a significant setback if you are not able to hold investment for longer term.

You can always pay down the debt to the IP from an offset and reborrow to make the funds tax deductible as a mitigant for no growth, as always assuming you are a disciplined money manager.

Better you keep the money in your control rather than the banks via redraw and principal payments, but each to their own.

 

[property_girl]

... I cant think of a better analogy than the old Italians - They hate banks. They hate debt. .

You are spot on. I hate debt, as do my parents, who are Italian.