interest only loans

[WebBoard]

From: Anonymous


Hi,

i am interested in buying my first property and have heard about the advantages of an interest only loan. i have a couple of questions:

1. i do not currently have a mortgage and am happy renting (i can rent where i want to live much more cheaply and couldnt afford to buy this close into the city). do i NEED to have my own home before i can qualify for an I/O loan?

2. i have heard that I/O loans are limited to 3 years term after which i have to repay the principle - is this correct?

3. what sort of deposit will i need? i hear that I/O loans you need a bigger deposit than for a mortgage.

any help would be much appreciated.

 

[Rixter]

Reply: 1
From: Rixter ®


No you dont need to have your own home to get I/O or P&I investment loan. As long as you can come up with a 20% deposit.

That deposit can be in the form of cash, another Line of Credit Loan or any other form of equity ( ie. shares, gold, etc) that you could use as security or collateral to borrow against.

I personally prefer to use other accumulated equity that I have for the deposit...this way I can borrow the complete purchase price plus an extra 6% to cover all my legal and other purchasing costs. The reason for this is, you can use other peoples money (OPM)and not use your own money. This increases your available cashflow.

Most lenders lend I/O for a 5 year term then the loan reverts to P&I but most lenders allow you to extend for another I/O period as long as you renegotiate before the original I/O period expires...

Happy Investing,
Rixter

 

[WebBoard]

Reply: 1.1
From: Rasputin .


And then after that period do you sell th eproperty to prevent having to pay P/I ??

 

[WebBoard]

Reply: 1.1.1
From: Keith J


Get a 25 or 30 yr term initially, and after 5yrs of IO ask the bank for another 5yrs IO. Then there's 15 or more years after the end of 2nd 5yr IO period in which to pay off the P&I, so they'll often allow it. And then after 10yrs refinance with another lender. So you can pay IO forever.

 

[WebBoard]

Reply: 2
From: Miakat .


I have an I/O loan that only required the same deposit as the standard P&I. Have a look around and see what is on offer.

Miakat

 

[Rolf Latham]

Reply: 3
From: Rolf Latham


Hi

5 to 10 % deposit depending on lender will do. Some offer up to 10 years on I/o, indeed if you take a Line if Credit you can have it as Interest only for ever (but that needs minimum 10 % deposit)

Ta


Rolf