Continued from previous blog post….
The client has read a real estate article which says to get the investment property loan as an Interest only repayment to take more tax advantages. Tim was further convinced that he could save $ 484 per month which he could use to pay off the home loan and save home loan interest.
We further assessed his motive to get the interest only loan. The interest rate applied to interest only loan was 0.7% higher than the capital and interest repayment option. Despite the fact the client could save $ 9,015 in tax over 5 years, the client’s additional interest after tax over 5 years was estimated as $ 15,024.
We helped the client to understand, that higher the tax advantages the more you have to pay the interest, The benefit from tax advantages supersedes the hike in the interest cost.
Further the maximum interest only period allowed by the bank is 5 years and the loan is then converted to capital and interest repayments. This could affect a young family as Christina and Tim when the loan repayment is increased by $ 1,000 per month.
Rands Financial Services is not an only a Mortgage Broking Firm but also CPA Accountants and owns a Registered Tax Agency. Therefore, our advice and assistance are more comprehensive than an average broker.
Therefore we always explain the options in details and clarifying any doubts, make appointments at a place and time convenient to you. Moreover, we update you with news often and revisiting your financial situation and continuously looking out for products which will reduce your interest at different stages of life.