Thread: Interest only house loans UH OH

well, they're all announcing handsome profits right now , so they are feeling bouyant

How do they know they're not investors? We have two houses and one of them is an investor loan. I know other people doing the same. Its an investment strategy.

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Originally Posted by Hall

In the Herald Sun today.Figures released by the reserve bank has found that 28% of new owner occupier housing loans are interest only loans. This is not investors. This allows buyers to borrow way past there ability to ever pay any part of the principal back. Banks are very worried and are looking at ways to curb this trend as it is growing. So approximately a third of all houses brought by owner occupiers are potentially bad debts for banks.
Cheers Hall

To me that's one way of getting ahead in the real estate game. Minimum input and maximum capital gains if the market keeps going ahead with no tax on gains. Some will use it wisely; others will stuff up.

Might be OK until house prices start dropping....

We have just recently signed up for a small housing loan. In Victoria, not sure if it apply s else ware, you have to in the paper work some where state weather you are a owner or investor. Remember now it is with the stamp duty. You pay more if you are a investor.
Cheers Hall

most self employed will be on interest only low doc loans unless they are already financially self sufficient.

and only the minority are as most are mum and dad style small businesses

they are usually only interest only for 5 to 7 years and then they become principal and interest loans

you could always refinance then and go interest only again but the resigning costs would be up there i would think...

unless something has changed in the last few years

Won't need to refinance ours as we will be rearranging everything before then.

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Interest only home loans with no checking on income was a very big factor in the crash of the UK housing market. Pushed prices up as everyone could pay more for the house due to reduced loan payment compared to full repayment loan. Everyone (banks included) thought that you could depend on prices going up. Worked fine until they didn't.