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  1. #1
    Join Date
    Nov 2005

    Default Sustainability of Interest Only lending on commercial, vs Principal and Interest

    Hi all

    I'm wanting to get a sense check of how sustainable it is to keep getting I/O lending on a commercial property to the value of $1.5m with 60% LVR.

    I've been that the usual amortisation period is 15yrs. If the first loan term is I/O for 5yrs, at the end of this term the lenders could request P/I across 10yrs. If the lenders aren't interested in renewing the loan on I/O, and assuming no repayments have been missed and LVRs are still solid, how possible is it to take the loan and find another lender who would offer I/O. Could I plan on continuing to find lenders willing to fund on I/O?

    How possible is it to continue to roll the lending from one I/O term to another, to maintain cashflow. Eventually (in approx 10yrs) I would like to reduce the commercial debt through selling down some residential property, but in the meantime I'm wanting to maintain high cashflow.

    In residential investing it seems a lot of investors use I/O loans indefinitely to maintain cashflow and enable further investing. In a commercial environment, how many investors do the same thing?

    Appreciate your views on this.



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