Browse Forums Home Finance 1 Jan 11, 2017 2:37 pm Hi Guys,
Question: Do people go interest only during construction as they want to minimise repayments so they have cash to cover unexpected expenses? Sorry if this is an old question(searched but couldn't find answer). We're building a new house to live in with a custom builder. Bank lender has approved loan and sent us documents to sign. They have offered 2 years interest only (at 0.1% extra cost), then reverting to interest + principal after that. Why would we want to pay the extra 0.1% and go interest only during construction? We're OK for deposit, and have good savings that we'll keep in a 100% offset account and use some of that money if we get short on cash from our normal monthly pay, so we don't think having the slightly lower monthly loan payments during construction is worth paying the extra 0.1% for. Am I missing something? Is there any other reason people go interest only during construction? Thanks a lot, Scott, Melbourne Re: Fixed Interest during construction: Why? 2Jan 11, 2017 7:05 pm Thats exactly why, plus the repayments aren't easy to calculate (for lender systems) on a P&I basis that changes every month. Most people have current living expenses (rent etc) and appreciate the breathing space. You probably have to suck it up, shame it's a slightly higher interest rate but remember again the difference will be on a lower loan amount, especially with your offset balance, so won't really amount to a lot. But thats different to your title question - you've asked about fixed interest rates? Not usually available during construction. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Interest Only payments during construction: Why? 3Jan 11, 2017 8:47 pm Thanks very much Rebecca. I corrected the title of my post. I was indeed interested in why people go for interest only payments during construction. Thanks for your response. That's really helpful. Cheers. Scott. Re: Interest Only payments during construction: Why? 4Jan 11, 2017 8:50 pm You're very helpful - and wasn't being obtuse, just making sure you got the right answer Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Interest Only payments during construction: Why? 5Jan 12, 2017 12:56 pm becjarrettdalton You're very helpful - and wasn't being obtuse, just making sure you got the right answer All good thanks. I was glad to correct the subject of the post so others didn't get confused. Good on you for your contribution to this forum.. Cheers, Scott. Re: Interest Only payments during construction: Why? 6Jan 12, 2017 1:12 pm you're welcome, happy to! Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Interest Only payments during construction: Why? 7Feb 04, 2017 7:50 pm I was recommended interest only during the building phase.. and made sense as I need every penny to pay rent and after build costs. Once my final construction payment is made though, will auto switch over to interest & principle payments. 1 62023 5 6816 i would suggest nothing is unreasonable for PCI. we did all sorts, including checking the hot water, checking all the GPO's had power, testing that the showers were… 9 98689 |