40 year loan term, good or bad

[Robbo2621]

Read an article in the paper the other day about more lenders are starting to offer loan terms of 40 years. Was pondering if this would be good or bad for an investor, obvious pro would be lower repayments, hence better cash flow, which could mean more properties. Con would be longer term debt, but for an IP this should be deductible anyway. Anyone have any thoughts, brokers may be able to shed some more light on this?

Thanks
Robbo

 

[Jamie M]

Most IP debts are interest only so won't cause much of a difference.

Cheers

Jamie

 

[Aaron_C]

It will have a small impact on borrowing power (for the better). Not sure how it will interact with NCCP though.

 

[Ausprop]

Most IP debts are interest only so won't cause much of a difference.

Cheers

Jamie

much difference? would there be any difference?

 

[Aaron_C]

much difference? would there be any difference?

Not for existing debts.

 

[Rolf Latham]

much difference? would there be any difference?

8 % approx better serviceability

ta
rolf

 

[kero]

who are the lenders providing these loans, may i ask?

this product should come in handy for investors who don't intend to pay off their IPs.

 

[buster]

st George Portfolio loans, the length of loan is meaningless its just a LOC, I would think most loans would be refinanced or paid off with in 10 years. Even tho you get a good deal at the time you always seem to be able to get a better deal a few years latter at a different bank.

 

[Aaron_C]

st George Portfolio loans, the length of loan is meaningless its just a LOC, I would think most loans would be refinanced or paid off with in 10 years. Even tho you get a good deal at the time you always seem to be able to get a better deal a few years latter at a different bank.

That's true but let's not forget that some people are unable to refinance due to income/age issues.

 

[Ausprop]

8 % approx better serviceability

ta
rolf

weird, presumably that's some contortion of a servicign calculator is it?

 

[Scott No Mates]

It wasn't that long ago that banks changed to offer 30 year loans instead of the previously standard 25 years. Effectively, you are talking cross-generational loans ie the kids will still be lumbered with a liability when the parents shuffle off this mortal coil.

 

[kero]

when i was settling for the first IP, among the big banks, SGB was asking for the highest LMI. not sure if it is still true. if it is, perhaps there is the giving on one hand and the taking on the other.

 

[Ausprop]

It wasn't that long ago that banks changed to offer 30 year loans instead of the previously standard 25 years. Effectively, you are talking cross-generational loans ie the kids will still be lumbered with a liability when the parents shuffle off this mortal coil.

if we are going to get this emotional let's take it a step further... it's a destruction of our national wealth to be borne by every man, woman and child. In fact it's a cost to our unborn grand children and those souls seeking refuge here from troubled foreign fields - imagine coming all this way only to find that corporate greed has robbed you of your destiny? we have been enslavened to Wayne Swans buddies as the big 4 run amok again... the rich get richer, poor get poorer. blood indeed is on the hands of these evil souls.

 

[Rolf Latham]

weird, presumably that's some contortion of a servicign calculator is it?

no

the repayment on a 40 yr loan is approx 8 % less

ta
rolf

 

[Mick C]

Most of the 40 years loan currently on the market are with non-conforming lenders....their rates on average are 0.5%- 1% more~ hence why they allow for the loan term to be 40 years.

 

[Marty McDonald]

Q.
Whats the difference between an evergereen interest only loan and a loan with a 999 year term?

A.
Nothing

 

[Mick C]

Q.
Whats the difference between an evergereen interest only loan and a loan with a 999 year term?

A.
Nothing

loan term wise - nothing.

Overall Serviceability - 15 years ( btw LOC and the 40 years anyway)

 

[Rolf Latham]

Q.
Whats the difference between an evergereen interest only loan and a loan with a 999 year term?

A.
Nothing

sometimes.................the so called evergreens are annually renewable or reviewable and we con ourselves into thinking its less likely with term loans : )

ta
rolf