Your Investment Property forum is the place for positive industry interaction and welcomes your professional and informed opinion.

$120bn of interest-only mortgages to go P&I

Notify me of new replies via email
Your Investment Property | 28 Nov 2018, 09:45 AM Agree 0
Around $120bn of interest-only mortgages will revert to principal-and-interest loans over the next three years – and many borrowers won't qualify to refinance under stricter new lending criteria
  • Interest Only Hero | 28 Nov 2018, 11:40 PM Agree 1
    I don't like regulators telling me or the market how we should manage our investments or personal finances.
    I.O. loans for investment have a place to play in the market place, especially for investors managing their tax arrangements and cash flow to improve their return on investment, which is no different that investors in other asset classes, business owners or pensioners trying to maximise their government benefits.
    There are to issues around the I.O. Vs P&I loans that a lot of commentators are mixing up, one is cash flow and the other is equity.
    It is acceptable to have one loan I.O. and have another P&I, while concentrating on paying down the P&I loan and maintain the balance on the I.O. loan. There are a number of reason for doing this, one is for tax planning, others could be for estate planning, future development, personal preference or family reasons.

    Something else to keep in mind, when borrowers pay back their loan with P&I repayments, the lender (banks) receive a higher monthly income or a higher return on their investment, the money they lent you on your loan.
    So is there another motivation for forcing borrowers to convert to P&I loans.

    An obvious consequence of these credit restrictions is they will put many families, average mum and dads into financial hardship.
  • Margaret | 30 Nov 2018, 09:42 AM Agree 0
    I like your response. I am on a pension. My IO loan has enabled me to be able to meet my basic needs and feel confident about it to a degree. This doesnt include anything more than minor home maintenance. With principle and interest only i am unable to cover the cost of food utilities rates and medical. The rental market is too high for those on a pension to maintain. I am hoping to find work. I am over 65.
  • rafa | 19 Dec 2018, 11:47 AM Agree 0
    It looks like io loans will be easier to get again now...
  • Disappointed | 08 Mar 2019, 04:49 PM Agree 0
    The proposed financial changes are directly targeted at the bulk of 1 or 2 investment property investors. What about those that have worked very hard for the last 20 years to build a portfolio for retirement and not be a burden on society in their old age. Interest only loans are a mandatory requirement as not too many investors could afford P&I loans holding 9 or 10 properties. Unfortunately broad brush regulations affect everyone, including those who have worked hard for financial security. We were recently got caught with 5 properties rolling over to P&I and considered a fire sale but we just "scraped" through. Even with cash flow positive properties repayments were calculated at around 7%. I doubt anyone could afford a 7% loan in this day an age and we would need to work 4 jobs 7 days a week just to meet stupid APRA regulations. Thanks APRA for ruining our future plans. We won't be caught again and yes we are selling one each financial year before our Interest Only loans roll over again. We are not filthy rich, this is our Superannuation.
  • Mark | 11 Mar 2019, 11:19 PM Agree 0
    Possible strong capital growth over long term in metro blue chip areas i.e. large land holdings on blocks >800m2 in $1.5m median priced suburbs. Significant negative cash flow holding costs to secure the long term capital gain.

    If the cash flow does not support the investment -> becomes difficult similar to any business experiencing cash flow issues. The 1990's recession in Australia (unemployment over 11%, house prices were flat for 7 years and negative in real terms) was due to over geared poor cash-flow investment positions in a tighter credit environment as high interest rates became unbearable. Try to improve cash flow and reduce debt.
Post a reply