Prepaying Interest.. would you do it?

[cityboy]

Hi guys,

Would you generally consider prepaying interest on your investment property loans to bring forward the deductions into this financial year if income levels are generally the same year to year?

I'm thinking about doing this with suncorp with my variable P&I loan but they want to charge $600.. $300 as a processing fee and $300 for converting from P&I to IO and fixing the interest rate at 6.19% for one year (current variable 6.65%).. another point is the loan would lose the .2% lifetime discount on variable rates offered initially when taking it out even if it reverted back to variable rates after the one year fixed..

Believe the deductions brought forward would more than cover the $600 and 0.2% discount (an extra $500ish/year) but that would be $500ish/year for the life of the loan too..

Would you do it?

Many thanks..

 

[Aaron_C]

Problem with prepaying interest in your situation is that you have to keep prepaying every year to maintain the deduction. It's generally best used when you have a large capital gain in the current year, like from selling a property, and wish to reduce your taxable income for that one-off transaction. Certainly I wouldn't recommend doing it without any other good reason.