Hi
Not sure if i understand all of this correctly, but i'll set up an example for ease of explanation.
get a loan requiring $1500/month interest, and if you were to get a P&I loan, you'd be paying an extra $700/month on top of that for a typical 30yr loan. if you were disciplined enough with your cash, so that you put in a "voluntary" $700 extra (on top of your IO repayment of $1500/month), you'd be paying your loan off at exactly the same rate as a P&I. I can't see any disadvantages of this technique, assuming you have the monetary discipline
Advantages however I see as below:
1) Access to a much higher amount of excess/offset cash, available to use on holidays, emergencies, or other small-to-medium cost items
2) If you want to buy a second place, you can use this excess/offset fund for a deposit. This amount will be much higher if you've got a IO loan. (i think) this is especially advantageous if looking to have the 2nd house under a loan with a different banking institution (?)
can someone add to the + and/or - items listed above. I consider myself as very disciplined with cashflow but am wondering why some MB's I've talked to say P&I is the way?!
cheers
Not sure if i understand all of this correctly, but i'll set up an example for ease of explanation.
get a loan requiring $1500/month interest, and if you were to get a P&I loan, you'd be paying an extra $700/month on top of that for a typical 30yr loan. if you were disciplined enough with your cash, so that you put in a "voluntary" $700 extra (on top of your IO repayment of $1500/month), you'd be paying your loan off at exactly the same rate as a P&I. I can't see any disadvantages of this technique, assuming you have the monetary discipline
Advantages however I see as below:
1) Access to a much higher amount of excess/offset cash, available to use on holidays, emergencies, or other small-to-medium cost items
2) If you want to buy a second place, you can use this excess/offset fund for a deposit. This amount will be much higher if you've got a IO loan. (i think) this is especially advantageous if looking to have the 2nd house under a loan with a different banking institution (?)
can someone add to the + and/or - items listed above. I consider myself as very disciplined with cashflow but am wondering why some MB's I've talked to say P&I is the way?!
cheers