If you have an Interest Only (IO) loan on an Investment property and the loan is more than a couple of years old it is likely that your interest rate is 5% or higher.

As predicted in last months blog, interest rates have fallen. Currently there are Principal and Interest (P&I) loans available for investment properties with an interest rate of 3.64% variable (even lower if you want to fix for a year).

This reduction marks the opportune time to consider refinancing. Consider the following example:

If you have a $500,000 IO loan at 5% the repayment is approximately $2,084 per month. Now, if you refinanced the $500,000 to a P&I loan at 3.64% the repayment is approximately $2,284 per month. That’s only a $200 per month increase and suddenly you are paying down the loan rather than just making interest payments.

There are obviously other factors to consider before any refinance but the above figures are an interesting comparison. As always, if you are interested in looking at ways you can pay off your loan quicker without impacting your budget, I am available to talk through your options.

Have a great month

Michael