loan question

From: John Fewster

Just a simple loan question.

If I was to take out a 30 year P.& I. loan with the first 5 years as I.O., what would the loan balance be at the end of the 30 years? Would it be zero? Or would there be a residual amount left over?
Is there an option to choose which way to go?
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Reply: 1
From: Rolf Latham

Hi John

Tis a fair question.

What happens there is that the first 5 years you pay interest only. Under most loan agreements the loan then reverts to a principal and interest loan so that ALL the loan is paid off in the following 25 years


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Reply: 1.1
From: John Fewster

Thanks Rolf. This would mean that I have to then factor in higher monthly P.&I. repayments for the 25 year part of the loan than I would otherwise be paying for a 30 year loan entirely P.&I.
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