Which loan? IO or P&I?

[Purple]

Hi,

Pls help new starter, I need advise.
Just purchased my very first property,
Plan to stay for 6 months for FHOG then convert this to an IP.
Currently on high bracket tax income. Planning to buy PPOR in soo many years in future (unsure when i would be able to afford one).

Any idea which loan would be the best for me?
Currently comparing between choosing IO loan and P&I loan (repayment only different about $17 per week).
My broker suggests to have P&I loan as the different is not much.
But as I read this forum, most people say better to choose IO and claim tax against it. Anyone could help with this?

And also.. which one to choose ?
Give 5% deposit, and pay LMI (about $4500)
Or 10% deposit and pay LMI (about $2400).

Would I be better off choosing IO and give minimum deposit (5%) so that I can claim more expenses?

PS: I am completely new to this investing.
What is equity exactly?
Is it the money paid back to the loan (principal) or the increase property value over years?
Would I still be able to borrow against equity if it increases (if i choose IO loan)?

Thank you.

Any advise would be much appreciated.

 

[Simon]

Get an IO loan with an offset account attached.

Don't pay anymore than the interest off the loan and put what spare cash you have into the offset account.

Cheers,

 

[DavidMc]

Get an IO loan with an offset account attached.

Don't pay anymore than the interest off the loan and put what spare cash you have into the offset account.

Cheers,

This is without a doubt the way to go. The reasons for this can be found discussed in many other threads. Also, my preference is lower deposit / larger cash buffer in offset account, but it will depend on your risk profile.

 

[BV]

I agree, and if your lender won't do IO with an 100% offset
look for another lender.

 

[Rolf Latham]

Also be aware that not all 100 % offset are the same.

ST George (on PPOR) and Heritage wont work well for you because they reduce the principal rather than u paying less interest

ta
rolf

 

[Purple]

Can I claim LMI as expenses when doing taxes?

 

[Rolf Latham]

Hmmmmmmmmmmm

That will require an acctant question.

Normally, LMI is a borrow cost and if incurred for buying an IP, its depreciable pver 5 years.

You are buying a PPOR, thence going IP so I dunno ?

ta
rolf