I would like to hear what others believe in doing these days in posibly uncertain times. Thnx
Who borrows interest only loans and who pays I terest and principle pls
- Thread starter motivated 5555
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I don't understand why you would do this?
This is definately why I love this forum
Im always learning.
I have ours set up like Tom-B and assumed most others would as well....
ooohhhh dear never assume it makes an *** out of u and me!
I suppose my reason would have to be sleep at night factor
KJ
What I don't understand is, how is paying off, say, 5k off the principal safer than having the 5k in the offset instead?
Maybe to pay of some debt.
some of us actually don't mind paying off debt - especially if it is in a PPOR and non-taxdeductible.
I have IO on my investment, with an offset (just a small buffer). And P & I on my PPOR, with redraw.
Maybe to pay of some debt.
some of us actually don't mind paying off debt - especially if it is in a PPOR and non-taxdeductible.
I have IO on my investment, with an offset (just a small buffer). And P & I on my PPOR, with redraw.
I think it's safer to HAVE the money to pay off your debt compared to actually paying it off. If you pay off the principal, getting it back out again depends on bank lending, not to mention the tax implications if you switch from PPOR to IP. Having money in the offset is more flexible.
What you want is to reduce the non-deductible INTEREST on the PPOR loan, which an offset will do just as well as paying off the loan.
I dont really know?
Have been so focussed on our IP and the way they were set up it hadn't occured to me....
Something to ring the MB about aaahhh maybe now!
My way - thats works for me.
IO on all IP's with offset on 1 (as no PPOR debt)
Took a while ( and sometimes still struggle) with the concept of not paying down the debt. But am slowly understanding that money in the offset is the most effective use of additional money for our strategy.
It definitely is not 1 size fits all.
Kaz
IO on all IP's with offset on 1 (as no PPOR debt)
Took a while ( and sometimes still struggle) with the concept of not paying down the debt. But am slowly understanding that money in the offset is the most effective use of additional money for our strategy.
It definitely is not 1 size fits all.
Kaz
One reason I would see in paying P&I on your PPoR as opposed to offset is some people are not as dilligent as others and if the money is sitting there accessible will eat away at it for non-deductible items/uses therefore setting them back, where as if it is paying off Principal it is untouchable.
EDIT: Ahhh see you just posted the same thing
Obviously there are a lot of benefits to have the money in an offset so you have that cash available but there is some sense into paying it off too and therefore locking it in. This could be for a number of reasons including because you are not tempted to spend it whether it be another investment or on a fancy car. I know some people will then say that the issue is with the person in regards to their spending. What works for some might not work for others, although I pay IO I would be quite keen to pay some P&I if my cash flow was better. I think a bit of both is the best option so you can still continue to have cash available but at the same time reducing your debt.
Another things is no one knows when the next propety market collapse will happen, global finacial crisis might happen or when a war will come or when interest rates go sky high. All these things could be less of a problem if you don't owe so much money on assets that have lost value.
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That doesn't make sense to me at all. Reducing your debt doesn't help your cashflow. Reducing interest does, and having 5k in the offset has the same effect on interest as actually paying the 5k off.
Seems that people just get emotional pleasure at paying debt off. Which is fine, but realise that it's emotional and may not make financial sense.
take a deep breathe, your determined to make everyone think like you but it's not going to happen. who said that "Reducing your debt will help your cashflow"?
your problem is you are so caught up in your own mind and way of thinking that you are now not even bothering to read a post propery.
you are the emotional one here, since your first post actually!
You are probably quite likely right.
The first thing for me though is the psychological aspect - I am less likely to spend the money if it is sitting on the mortage then if it is sitting in an account. Don't ask me why, but it is the truth. It doesn't really make sense, but then it doesn't really have to - it just is.
Also, I have already messed up my debt on my PPOR mortgage something shocking (having purchased it before understanding about finance structure for investment purposes) - so using my redraw or paying down my debt really isn't going to affect much of anything when we do move into a new PPOR: we will either sell this one or have to rent it out without being able to deduct interest anyway.
Lastly, it is actually part of my long term goal to pay off all the debt on all the properties - the small amount of principle being paid each f/n will add up over years, but isn't going to worry me over the short term - so why not start now. I have very clear goals of where I want to be and how I want to get there and paying off the debt like this doesn't lengthen or shorten that goal post. May as well pay it off, as spend it at the food court or in Target.
Yes, the money could possibly be put to better use, but some of us don't stress about getting the absolute best use out of our money all the time - and if you don't need or want to stress about making sure every single decision is the absolute 'best' money making strategy, that's alright too. On our household income, we could certainly be investing ALOT more cash in alot of high performing areas, but we aren't looking to be rich - we just want to ensure we can maintain our current "Canberra" lifestyle when we do choose to retire.
