Hi,
Does anyone know what actually happens when you opt for P&I repayment method, particularly in ANZ Simplicity Plus?
Say the loan starts with :
Principal = $300K
Redraw = $50K
Interest Rate = 7.1%
Duration = 30 years
Using the repayment calculator tool, the scheduled payment for P&I is $2016.10
I'm thinking :
1. The minimum I have to pay is $2016.10 and it is fixed every month.
2. Principal goes down by the amount calculated by interest incurred for the month (this amount will be calculated based on the interest rate, the redraw, and the number of days)
3. Amount in Point 2 is not available for redraw
4. Any additional amount on top of $2016.10 goes to redraw account.
5. Reduces life of loan but does not reduce the minimum amount per month. It can lead to default if I cannot pay $2016.10 per month.
If I assume this, it will mean if the interest rate goes up, the minimum amount will be > $2016.10 but if the interest rate goes down, the minium amount is still $2016.10 but more principal will be paid off leading to an earlier settlement of the loan.
I am wishing this is not the case as my aim is to reduce the minimum amount required every month.
If you have experience with this loan in P&I, could you enlighten me please? Thanks.