Should I Go Interest Only (IO) OR Principal & Interest (PI) Loan in 2022?

Рет қаралды 28,294

Жыл бұрын

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passive income from property
Australian property investing
Australian property market update
interest rate changes
cashflow positive properties Australia

Пікірлер: 70

@PersonalFinancewithRaviSharma Жыл бұрын

Ravi@searchpropertyau.com.au

@adamcottrill9749 Жыл бұрын

Thanks Ravi so much for answering my question

@jakebskeen8361 Жыл бұрын

This strategy should really be sent with the caution of previous crashes being caused by undisciplined people as you said. Love to see how the risk as you keep mentioning year on year increases(equity built) but houses aren’t always linear like this, over bidding being the most recent disruption to the norms

@patrickrecommends Жыл бұрын

great video Ravi definitely have helped me broaden my knowledge when i take the plunge

@PersonalFinancewithRaviSharma Жыл бұрын

Thank you! Glad it helped 🙌🏽

@JCASTELLINO007 Жыл бұрын

Unfortunately, I think alot of people (who bought in the last year) will need to wait till property values go up for them to be able to access equity in the first place. In short, they'll need to wait to restructure their loans away from Principal plus interest

@djx3213 Жыл бұрын

Thanks Ravi, as usual

@PersonalFinancewithRaviSharma Жыл бұрын

Thank you! 🙌🏽

@pjj1397 Жыл бұрын

really enjoy your videos ravi

@PersonalFinancewithRaviSharma Жыл бұрын

Thank you! 🙌🏽

@mitch4342 Жыл бұрын

You are allowed up to 10 years with IO investment properties too. OO is 5 yrs where I work

@nathancad 7 ай бұрын

Smash your own home P&I and all investments properties interest only

@LBNOSIN Жыл бұрын

Doesn't the interest you are paying back reduce as you pay off some of the principal, so instead of putting the cash in savings. You can reduce the interest payments. Then refinance when you have enough equity which should be faster as you have been paying less interest. Although this only works if you have money to pay the difference between IO and P+I repayments. I could be totally wrong though as I haven't done this.

@uberboiz Жыл бұрын

What you said makes a lot of sense, and I would think a genuine 'home owner' would do that (i.e. pay principal and interest). Unfortunately most property 'investors' are not genuine home owners (arguably they don't even fit the definition of investor) - they simply speculate using borrowed money, hoping the price of the properties would have increased by the time the IO period is over so they can sell at profits or use the increased equity to borrow more money to purchase more real estate.

@whatsnew9510 Жыл бұрын

Interest only with offset? Thoughts?

@brendanp160 5 ай бұрын

My question is with all that additional cash flow, where should you store it? Interest Savings account? If you put it in the offset against one of the home loans, wouldn’t that reduce your income tax return?

@nishanksamant9847 Жыл бұрын

Love your videos. Borrow with Ravi😀

@PersonalFinancewithRaviSharma Жыл бұрын

Thank you! Will be coming soon 🙌🏽

@rafaelferreira3509 11 ай бұрын

But IO strategy only works assuming properties will only go up in price? What if it downturns?

@smb7576 Жыл бұрын

very well explained ravi. i think this is lost on most non-investors who think debt is scary and is to be avoided. but they still buy new cars using a personal loan. go figure!

@uberboiz Жыл бұрын

leverage is a double edged sword whether you use it to buy properties or cars - too much of it could put you in a precarious position.

@CheesyPumbah 3 ай бұрын

Doesn't taking out an equity loan increase your repayments of that property?

@quanlamtruong5870 Жыл бұрын

Hi Ravi. Great video as always. I was just wondering if it’s a good idea to purchase my first property with First Home Buyer Fund? Then, I can save up more deposits for my next property’s deposit?

@alexandrosmargo552 Жыл бұрын

How many years maximum one bank let you have interest only before you need to refinance with other bank?

@josesworld419 Жыл бұрын

5 years, and if you dont refinance your repayment will be a lot bigger to catch up the ladt 5 years

@mehreenhaque4312 Жыл бұрын

Is it easier to borrow from bank for multiple properties?

@PersonalFinancewithRaviSharma Жыл бұрын

More difficult but, yes relative to 1 property which returns a lower rental yield

@momma_goose Жыл бұрын

Borrowing with Ravi: Is that relevant now though with falling house prices? My current property is principle and interest, should i go interest only? as I now have enough equity and savings to buy my 2nd property

@splinter1012 Жыл бұрын

Isn't that a conversation you should have with your broker and other advisors? Your specific circumstances are unique to you, best to get the right advice from someone who knows your background. All the best!

@momma_goose Жыл бұрын

@@splinter1012 true - just learning as much as I can, thought I’d throw it out there. Recession proof is all I’m looking for

@splinter1012 Жыл бұрын

@@momma_goose absolutely and makes sense to build that knowledge and options. On the specific question of going I/O or not - Ravi does mention in his vid the pros and cons of I/O and why it’s preferred. If you can utilise that freed up cashflow for investing then it’s a good thing. But going I/O without other sources of revenue (ie other investments) elsewhere means your loan will take longer to pay down. The goal is I/O allows you to accelerate the investment journey by increasing your cashflow and have more funds to use for further investing. Then the equity growth on the investments long term is what will ultimately pay down your debt

@momma_goose Жыл бұрын

@@splinter1012 yep - that makes sense. Cheers!

@tiptopmuffin Жыл бұрын

Do the banks judge you differently on an interest only loan ?

@uberboiz Жыл бұрын

They'll charge you a higher interest rate for sure.

@trent3727 5 ай бұрын

What if interest rates go up?

@zookiatookya320 Жыл бұрын

Borrow with Ravi ❤

@MsDharmista Жыл бұрын

borrow with ravi

@splinter1012 Жыл бұрын

Borrow with Ravi. But when you do make the video Ravi could you please also include advanced tips/suggestions for the more astute investors? There are lots of videos out there discussing the basic tips of how to increase your borrowing capacity and I've already applied those. Of course you'll need to cover the same basics for the wide audience you have, but I'm interested in the more nuanced, technical or outside the box solutions you may have to offer.

@Ayeare Жыл бұрын

Can I engage with your buyers agent service without a strategy session?

@PersonalFinancewithRaviSharma Жыл бұрын

Shoot me an email ravi@searchpropertyau.com.au

@splaterpus23 Жыл бұрын

Probably a dumb question but sometimes my brain doesn't think. Say you went PI and you were paying down 200 a week on principal. If you went IO you were getting 200 excess cashflow. For IO Isn't that 200 excess taxed? If you went PI, the 200 would not be taxed as it's paying down your loan and then could you just not pull the equity out anyways (even if 90% still be better if you tax benefit)? Or do you still pay tax on it or is the issue that one loan becomes larger instead of creating a new loan? I'm sure im missing something, thanks.

@LBNOSIN Жыл бұрын

Interesting question! I have no idea but would be keen to find out too

@tsingh7491 Жыл бұрын

That is correct I believe. Another way is to look at it from an 100% offset perspective. Whatever you have lying in your offset account, you dont pay interest on. So, in the current situation where you have say 100k savings in offset with 5.5% interest rates, you would need to ensure you make a return of much higher than 5.5% which you would then pay your individual tax on. From what I've understood so far....IO loans come into play where you want to lower your monthly payments for whatever reason, faninacial pressure or external investing. I spoke to a broker today who suggested a split loan can be structured with 100% offset where you have - say out of a 650k property loan you can have 600k portion as IO and 50k portion as Principal for 1,2 or 3 years. It all comes down individual ojectives and strategy.

@LukePhillips90 Жыл бұрын

Borrowing with Ravi

@nicoosorio855 Жыл бұрын

Borrow with Ravi 🙂

@greenfamily6080 Жыл бұрын

BORROW WITH RAVI

@akshatsaxena8409 Жыл бұрын

Borrow with Ravi!

@annayesiltepe5680 Жыл бұрын

Borrow with Ravi please

@pantelisioannou5673 Жыл бұрын

I think its a great strategy if you are on say your 3rd 4th or 5th property. If you are on your 1st that means that you are probably young with an entry level job and probably dont have many savings. If economic external factors arise and you cant rent your property or something goes wrong (health,loss of job) you could end up in hot water, where as 3 4 or 5 properties could easily cover the expenses of the loan. Also if the housing bubble bursts what do you do if you are on your 1st property still? I am not against your idea just being a bit more sceptical as there was a burst in 2002 -3 and again another one is expected in the coming years. Look forward to your reply

@JCASTELLINO007 Жыл бұрын

Borrow with Ravi