I have been helping one of our clients who own 5 properties in total.
We started the discussions to restructure their loans in late October / early November.
We finally lodged applications a week ago to restructure 3 of the 5 property loans.
Depending on where your loans are at, where you are in life, and what your commitments are, sometimes it makes sense to see what options could propel you further.
In my clients ‘instance, given the timing they had been building their portfolio, many of their loans had come off Interest Only terms and had started converting to Principal & Interest.
It is good to start paying down your investment loans ie Principal & interest repayments whilst the rates are so low.
However, the other end of the spectrum is paying off your owner occupied property first.
So what has restructuring allowed these clients to do?
Restructuring has enabled these clients to put an extra $2k per month toward their owner occupied loan.
Adding this $2k per month to their offset account will have a reverse compounding effect.
Each month, more of their actual monthly repayment will reduce the principal of their home.
In approximately 3 years, as they direct the $2k from the investment properties to their home loan, they will completely offset their owner occupier loan (also taking into account their existing savings).
Note though, they don’t owe a lot on their home at this stage.
If they had continued paying off the $2k toward the investment properties, the same home loan would have taken approx. 10 years to completely offset.
That is 7 years quicker.
Interest Only repayments aren’t suited to everyone.
You must seek specific advice on which path you should take.
In this instance the Interest Only rate they are currently paying is equivalent to P&I rate some lenders are charging for investment lending.
Rate is one of the many things to consider.
But given how lending works right now, you could restructure to fast track your goals.
It could mean a difference between being able to service a loan or not.
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