Westpac P and I to interest in advance

[tobe]

I agree you should break, but dont take a 3 yr fixed interest in advance, do 1yrs, and roll them over each May if you still require it.

It always intrigues me people who break a fixed rate to go into another fixed rate.

 

[Aaron_C]

I don't understand the obsession with prepaying interest without a massive CGT windfall to offset it.

 

[tobe]

I don't understand the obsession with prepaying interest without a massive CGT windfall to offset it.

Im doing it this year myself. When I estimated by PAYG variation, I didnt realise what a great year I would have. I dont want to get to the end of the year and owe the ATO, and I dont want them to pull the PAYG variation, which they can do if you underestimate your income, so Im paying interest in advance on a couple of loans.

It can also be a method of debt recycling if you borrow the funds for the repayment.

 

[WillG]

It can also be a method of debt recycling if you borrow the funds for the repayment.

mmm ... interest on interest. That will be an interesting discussion in your ATO audit!

 

[D.T.]

mmm ... interest on interest. That will be an interesting discussion in your ATO audit!

Perfectly fine as long as you have the right intentions and structure it correctly

 

[luckyone]

But Aaron, if I dont break this year, then I wont be able to claim for the next 4 years.

Also the cost of the break fee is offset well and truly by (i) tax deduction of the break fee (ii) the new 4.79% compared to the current 5.69%.

On a 500k loan, I think it averages out better. By being able to pay interest in advance, it means I get back about 8 to 9K each year as a tax deduction by going interest only in advance.

Where did you get a fixed rate of 4.79% for three years from. The westpac site currently says 5.29% (or 5.09% if on a package)?

 

[tobe]

Its cheaper if you pay in advance.

Usually 10 to 25 points cheaper. Has to be, otherwise it would be deemed a tax avoidance scheme by the ATO.