IO or P&I ?

[richard56]

A hypothetical situation....
You have a 100K loan.


In one year which scenario would pay off more of that loan.


1: The 100K loan is on P&I and this cost you $219 per fortnight


2: The 100K loan is on IO and this costs you $117 per fortnight
Saving you $102 per fortnight and at the end of the year you do a bulk reduction of $2652...being 26 x $102.


Thanks
Richard

[Keys]

Option 1.

Google compounding interest. The 8th wonder of the world.

[Anthonyacat]

But, if you have a better use for those principal payments that earns you more (or costs you less) than the mortgage, that would be a preferable situation.

[Monsterbishi]

I love my table mortgages, there, I said it...

[donna]

Where it is a better use (and it's been talked about on PropertyTalk) is when you've got a mortgage on your home with non deductible interest and rental properties.

You can go IO only on your rentals mortgage and pay down your home loan faster.

cheers,

Donna

[Frezzinghot]

Yes we are all IO now on all IP, we still have a mortgage and are using the extra $$ to pay down OO debt.