Switching from Interest Only to Principal and Interest

Most banks have a limit on the Interest Only term for owner occupied and investment loans. For owner occupiers, it is normally 5 years. For investors, it can vary from 10-15. If you are reaching the end of an interest only term in your loan, your bank may or may not offer to extend, and if they don't, your loan will rolled over into a default variable rate product. 

However, and notwithstanding what your bank says, you have options. You can refinance as interest only with another lender, or if you are ready to switch to principal and interest, then you want to ensure you are getting the best product for your needs. The mortgage market changes quickly, and without the benefit of a professional to help guide you, you can often end up in the wrong product. This costs you money and may limit your future finance options.

To get the most to of your loan, contact your broker and get them to review your finance obligations and future requirements. Not only is this free (in most cases), but you can also have peace of mind that you are not paying any more than you need for your loan. 

mortgage-loan-types.jpg

To see how much you could save and what options you have, call Taras on 0414636211. It may be the most profitable phone call you make all year.

Interest Only Loans - Can you, should you use them?

Interest only loans have been in the headlines for a while now. And mostly, they’ve been used as a proxy for bad loan practice. However, the headlines never reveal the full story.

Interest only loans serve multiple functions. Namely: -

  • As part of a sound investment strategy - using interest only loans and offset accounts to maximise income tax deductions, access to personal funds and maintain loan flexibility,
  • Create wealth - free up income for investment in other wealth producing assets,
  • Flexibility - where you're unsure if the property will be owner occupied or investment at a certain time in the future,
  • Cash flow - to balance income and expenditure for a short period of time after purchase.

If you're considering an interest only loan you will need to plan carefully, be well prepared and know which lender to approach. The best way to achieve this is to consult your broker and have them give you advice on how to best structure your application and which lender is most likely to approve your application, as bank appetite for IO loans changes quickly and your broker knows the overall market better than anyone. 

For more information on interest only loans and how to apply, call Taras at Runmore Loans on 0414636211. For impartial and objective advice that saves you money there is no better person to call.