Mortgage Minute – Why Interest Only Loans

TRANSCRIPTION

Why use an interest only mortgage

Looking at interest only loans and why people do it, well, one of the main reasons is property investors are not always focused on paying down debt on all of their properties. They want to focus on just one property at a time. Usually, the property that’s going to have the best capital gains and use interest-only debt because it’s tax deductible on their investment property. And the difference is this quite evident. So, on a million dollar mortgage just paying interest only using the 4.29% interest rate. Principal and interest, you’ll be paying 2,274 a fortnight. On interest-only, 1,650 a fortnight. So by not contributing to principal repayments each fortnight, you’re going to save $624 and that extra cash flow is going to help you if you want to reinvest in more properties, you might use that money for maintenance or renovations, or you might just put that money aside to make more lump-sum contributions, and that’s a different strategy altogether so use interest only.