• Login:
Welcome, Register Here
follow PropertyTalk on facebook follow PropertyTalk on twitter MobilizeMail follow PropertyTalk on LinkedIn follow PropertyTalk on RSS

Latest Threads/Videos

Categories:
Property
Other
Video

News and Views

Most Active - Last 30 Days


Deals and What's On banner
Page 1 of 2 1 2 LastLast
Results 1 to 10 of 11
  1. #1
    Join Date
    Apr 2004
    Location
    Auckland
    Posts
    1,417

    Default Interest Only Loans Gotchya

    Something I'm sure most of you already know...

    When interest only period expires your repayments jump significantly.

    eg $200K 25yr term @6%:
    I/O for 5 yrs - monthly payment: $1,000
    After 5yrs P&I monthly payment: $1,432

    Just had 4 loans do this.
    Back to drinking cheap wine I guess!
    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.

  2. #2
    Join Date
    Nov 2009
    Location
    North Shore Auckland
    Posts
    499

    Default

    PC....did you ask to extend the interest only loan?

    I've done this with my bank.....been interest only now for about 10yrs and got a 5yr extension.

    Mind you, I have reduced the amount owed by about 40% over a 10yr period.....and the current LVR is rather low

  3. #3
    Join Date
    Mar 2012
    Location
    Quakeville
    Posts
    40

    Default

    Would that be because instead having 30 years to pay back the principle because you've (for lack of a better word) wasted 5 years you now only have 25 years left to pay back the principle and hence need to pay back more per month to catch up?

  4. #4
    Join Date
    Nov 2006
    Location
    Cyberspace
    Posts
    4,428

    Default

    Nope. It's because there is no time frame to pay back principle. It is a loan to infinity. There is a proportion of the loan which is principle, and some (most initially) which is interest. On an interest only loan you are not paying the principle. It comes back to bite you in the end.

    Some here suggest that you purchase many properties on interest only and sell off some after a few years for a profit. Using the profit, they pay off the other properties.

    A little risky in this environment I suggest.

  5. #5

    Default

    Up to 30 years maximum was pretty normal for a Table Loan I thought.

  6. #6
    Join Date
    Jan 2011
    Location
    Christchurch
    Posts
    714

    Default

    I try to have loans interest only for long enough for the rent rises to cover the extra when principle payments start.

  7. #7
    Join Date
    Mar 2007
    Location
    Auckland
    Posts
    1,715

    Default

    I have all of my loans on interest only.
    Never had any problems renewing them with the same deal, you just have to ask and they roll over to another interest only.
    I have paid off some of the principal here and there with lump sums.

    Amazing that so many people here have principles when they discuss repayment of principal.

  8. #8
    Join Date
    Jun 2005
    Location
    Auckland
    Posts
    4,760

    Default

    With lucky (or unlucky) timing I switched from interest only to P&I with a lower payment, because interest rates had fallen so much.
    DFTBA

  9. #9
    Join Date
    Nov 2009
    Location
    North Shore Auckland
    Posts
    499

    Default

    Quote Originally Posted by Keys;274443 [B
    On an interest only loan you are not paying the principle. It comes back to bite you in the end.

    Some here suggest that you purchase many properties on interest only and sell off some after a few years for a profit. Using the profit, they pay off the other properties.

    A little risky in this environment I suggest[/B].
    I go interest only because I believe it to be LESS risky

    Borrowing at interst only rates allows me to build up considerable cash reserves that I otherwise couldn't with a P&I mortgage

    Then I make an annual payment on my fixed interest only loan of up to 5% of the outstanding balance.... this doesn't attract a penalty

    The point here is that I pay back the loan at an amount that I decide on.....not what is dictated to by the rigours of a convential table mortgage

    The "downside" is that it takes a lot of discipline to keep your grubby mits of the cash surpluses

    But for me this normally isn't a problem

  10. #10
    Join Date
    Apr 2004
    Location
    Auckland
    Posts
    1,417

    Default

    3 loans with ASB.
    Already done 5yrs I/O.
    To extend I/O period they want to redocument.
    For 2 loans the rents more than cover the $600 P&I payment increase.
    3rd loan will need topping up from my beer money :-(.
    4th with ANZ - P&I at new interest rate is $100 per month cheaper than it was I/O - great!

    An unexpected large jump in repayments that hadn't been on my radar.
    That extra $ would probably be better used buying another than paying Principle?
    The three most harmful addictions are heroin, carbohydrates and a monthly salary - Fred Wilson.


 

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •