Maximum period for interest only

Discussion in 'Property Finance' started by svamin, 8th Nov, 2012.

  1. svamin

    svamin Member

    Joined:
    9th Aug, 2012
    Messages:
    41
    Location:
    NSW
    Hi, my broker just advised me that the usual Interest only period with most lenders is five years after which the loan could be either refinanced or converted into PI... Is this a valid statement?

    On 30 year loan the first five years on PI loan will comprise mainly of onterest repayments in case of annuity formula...
     
  2. Aaron_C

    Aaron_C Finance Broker

    Joined:
    11th Jun, 2011
    Messages:
    12,670
    Location:
    Melbourne, Victoria
    Most of the time yes but sometimes you can negotiate a further 5 year extension to the IO period.
     
  3. Rolf Latham

    Rolf Latham Member

    Joined:
    2nd Mar, 2001
    Messages:
    18,791
    Location:
    Confused = Sydney, Brisbane and Gold Coast
    If the loan is over80 to 90 % then thats generally true.

    If the loan is at 80 % or less, quote a few lenders will do 10 years straight up, and at least one will do 15.

    There is some variabaility on fixed term loans, where for ega 3 year fixed can only be comboed with a 3 year IO term.

    If you are after a longer term IO period, a proper evergreen LOC that some lenders use will have an IO period for the full loan term. Note though, that these products have their own issues in terms of RISK which can be different to a normal SVR loan.

    ta
    rolf
     
  4. buster

    buster Member

    Joined:
    3rd Nov, 2010
    Messages:
    452
    Location:
    mildura vic
    Ive loan got a plain ordinary IO st george portfolio loan, Ive had for 10 years, it expires in 2050. So you must be able to get IO loans up to 47 years. It started as a construction loan then was convert to an LOC.
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

    Joined:
    29th May, 2001
    Messages:
    8,506
    Media:
    1
    Location:
    Melbourne
    I can't see how you'd be able to get any loan with a term of 47 years in todays regulartory environment. It might have been possible 10 years ago, but almost certainly not today.
     
  6. svamin

    svamin Member

    Joined:
    9th Aug, 2012
    Messages:
    41
    Location:
    NSW
    Thanks, Guys! Exactly what I needed.

    As I understood, five is a standard but could be negotiated. As always, do not ask- do not get:)
     
  7. jingo

    jingo Long Term Investor

    Joined:
    22nd Jan, 2007
    Messages:
    2,205
    Location:
    Melbourne, Victoria
    Or you can refinance to another bank at the end of 5 years and go IO again.

    Regards Jason.
     
  8. buzzlightyear

    buzzlightyear Member

    Joined:
    7th Feb, 2004
    Messages:
    4,096
    Media:
    17
    Location:
    Melbourne
    All my IO loans that have been with Westpac have been extended without me having to do anything.

    ANZ's will not and I also know of a friend who has had their loan repayment change to P&I. The only way ANZ will remain at IO is another full application!

    You'd be surprised how long is 5 years in the scheme of things. Circumstances change, and the effort may be lost anyway, as you may refi or sell within that time, making the longer IO term redundant.
     
  9. Rolf Latham

    Rolf Latham Member

    Joined:
    2nd Mar, 2001
    Messages:
    18,791
    Location:
    Confused = Sydney, Brisbane and Gold Coast
    and there is a process now where you can do a conversion back to IO with a full app.

    My experience on this it works sometimes when the stars and the moon line up, and the person thats dealing with it has a reasonable knowledge of the process and its high tide.

    even with all the ducks lined up and the lvrs below 80 %, the anz mess is unreliable at best

    ta

    rolf
     
  10. Brady

    Brady Big 4 Banker

    Joined:
    19th Jun, 2012
    Messages:
    2,708
    Location:
    Adelaide
    CBA can do a maximum of 15 years, but from above 5 years you need approval from above :)

    Also no questions asked on going back into IO.
     
  11. Marty McDonald

    Marty McDonald Mortgage Broker Syd

    Joined:
    5th Oct, 2010
    Messages:
    1,443
    Location:
    Sydney (North)
    Yeah CBA converting back to IO can usually be done by mortgage services ie not a credit decision just a signed form required. So with them let it roll over to P & I then send in the switch form.