May 18, 2016

Discussions: Interest Only Loan

Seems that if u hold the property for a short time, u can take interst only. And vice versa.
But the tax deductible gives some beneficial for this loan. Maybe, its meant to be a good thing..
it is good for investor because, the tax payable, can be reduced since now purely paying interest which is a cost also. so i borrow the money from the bank, paying them the interest for the first 5 years. and rent out the property which generate positive returns. the rental return is taxable. but since interest only loan is tax deductible. if the interest payment is greater than the rental (income), that means i don't need to pay tax, instead government have to pay me
not sure if i got it right (especially the last part) , but the general idea is like that hahaha
Ah i see.. But some point it has to revert back to the normal loan scheme whre we need to pay the principal too.
Nevertheless, it still a good thing coz it can buy us some times to pay less..
Pretty tempting mehtod of borrowing.. Hha..
hold on i'm thinking on the cash flow
yea buy us sometimes to pay less FIRST
but in total we pay MORE since we pay less for the first 5 years..
Yep, like wht i am thingking too..
So it just loan inside a loan. Haha..
But again it not tht bad if we could get tax dedyction frm it..
as a result the interest would be higher, coz we DELAY the payment for the first five years.
yea you are right
not too bad for an investor who is flipping properties
the question is : would the tax deduction is higher than the extra interest rate
and how much?

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