P&I and I-only strategy

[Ching]

Hi all

I would like to get some advice on my property investment strategy.

To give you a background:
I have 3 investment properties where all are Interest-Only loans. My husband bought his house before we got married, we didn?t change the title so our PPOR is still under his name. Legally I don?t have a PPOR and have 3 investment properties.

Recently I bought the 3rd investment property and borrowed to nearly max capacity based on my income and access the equity of 1st property.

Yesterday I went to visit some sites and asked about some house & land packages, the mortgage broker told me I can no longer borrow based on my current situation, even in a year time.

She suggested me to use my husband?s income & PPOR?s equity. If not, another idea that she suggested is to convert one of my investment properties loan to Principal & Interest (P&I) such that my loan will get reduced over time. The more appropriate strategy she recommended is to have say 5 P&I properties and 5 I-only properties (i.e. pay off one loan and use that to purchase next property, so on and so on).

I?ve always read that people can get 10 or more investment properties even with low income and also should only have Interest-Only loans for investment properties.

Let?s say if I want to do investment independently without relying on my husband?s income or PPOR, if my income doesn?t change, does that mean my immediate strategy now is to convert one of the investment properties loan to P&I in order to reduce my loan over time and increase my borrowing capacity in few years time?

Any advice would be appreciated, thank you!

 

[Richard Feynman]

Hmm.. broker adviSed paying P&I on a loan to increase borrowing capacity? Sounds like the worst advise in the world, unless you're getting close to retirement age and the bank's won't touch you with a high LVR. But I don't know much.

It might be an idea to post some more info here so one of the many helpful, knowledgable brokers on here can have a chat about your situation.

What are your IPs worth, how much equity is in them, what is their cashflow like, what's your income, how old are you etc?

 

[Aaron_C]

Now is this broker a CBA / ANZ mobile banker? Changing your loans to P&I won't help anything....you are just going to give money to the bank that you can't take out again until you request a new loan anyway. In fact, with most lenders that assess your repayments at existing levels - changing your repayments to P&I will actually further lower your borrowing capacity, not increase it.

 

[Terry_w]

I cannot see how having a PI loan would change or effect serviceability at all. It would hinder it with most banks as the repayments are higher.

It may also not be wise from a tax point of view, especially if your husband has a loan owing on his PPOR.

 

[r3ckless]

Going P&I is the worst advice ever. and for going P&I over 5 years will see little change imo

 

[Jamie M]

Hi Ching

Are you sure they said to covert to P&I to improve your borrowing capacity?

If so, it would be worth seeking a second opinion. There's a couple of great brokers from Vic on here if you're in need of face to face - such as Pete Tersteeg and Aaron C.

cheers

Jamie

 

[ZachAnSel]

Hi Ching, are you comfortable to publish numbers?
Salary, loan, lvr, family (Dinks?). This will help us understand further and will able provide better advise