18 years ago I was living out of a tent, in a little village named Balibo, on the top of a mountain in East Timor when Matt, a mate of mine, said something that’s stuck with me ever since.
What did he say?
“No one ever went broke making a profit”
Why is that important?
Because for eons, people’s innate aversion to pay the taxman has led to a string of poor financial decisions, which have been slowly bleeding them dry.
One of those poor decisions (not in every case of course) is interest only loans.
10 years ago interest only loans made a lot of sense.
The interest rates on interest-only loans were basically on par with principal and interest loans. It made perfect sense to go down that path to free up cash flow and maximise the tax-deductible portion of outgoings (the interest part of your home loan repayment).
Today, the story is very different.
Price pressures from industry regulators have increased the costs of interest-only loans so much that for most property investors, choosing an interest-only loan could be costing them thousands.
The problem with this is, hardly anyone has changed their tune in terms of the type of loans they recommend to investors.
Well, they’re either lazy, they haven’t figured it out yet (pretty much the same as lazy) or they don’t have the smarts to articulate the risk vs reward.
How can it help you?
This calculator will help you work out which loan type provides you the most benefit.
We calculate the results by taking into consideration:
- The interest cost of the investment loan compared to the tax savings of negative gearing
- The amount you’ll be owing compared to your repayments
What do your results mean?
If your result is a positive figure (green coloured), you could be better off choosing a principal and interest loan. If your result is negative, you could be better off choosing an interest-only loan.
Transparency is the cornerstone of everything we do at uno. It’s why we get out of bed everyday.
We couldn’t care less if you choose an interest only loan or a principal and interest loan.
What we care deeply about is that it’s the right loan, for your specific situation, right now.
To find out what works for you, use the calculator right here:[widget-piio-calculator]
And if you want to take it one step further than the calculator, you can live chat with a mortgage adviser here.
This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. uno can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender.