Why do banks still offer Interest Only Loans
| # | Post |
|---|---|
| 1 | If the government and banks really wanted to help the housing market why don't they get rid of or limit interest only loans. loud_37 - 2021-06-27 10:18:00 |
| 2 | Because for some businesses they are a useful loan that gives tax advantages. May not be as useful with the recent changes to the rental market rules. But for other businesses may still be OK. macman26 - 2021-06-27 10:28:00 |
| 3 | I can understand a business that needs a loan to increase productivity or if someone gets in to hard times and need to reduce their outgoings until they get back on their feet. But it shouldn't be an option for property investment. loud_37 - 2021-06-27 10:32:00 |
| 4 | Maybe it has changed now? Maybe someone can shine some light on this but I know a family who went into Westpac to get a loan. The staff reiterated that they need a plan in place where the loan would be fully paid off and given their age they got a much shorter time frame to pay it off. The bank employee also mentioned she could see they had a number of properties but she needed a finance plan of how and when the loan could be paid off, she also said she wouldn't take their properties as collateral. This family wanted a loan to rebuild on a piece of land but clearly if it was just income and expenses the home loan would never be paid off that in their time frame. They also spoke to 2 mortgage brokers. Edited by rayonline_tm at 10:38 am, Sun 27 Jun rayonline_tm - 2021-06-27 10:37:00 |
| 5 | 40% of bank lending to residential property investors is on interest-only loud_37 - 2021-06-27 10:49:00 |
| 6 | For businesses. gabbysnana - 2021-06-27 10:55:00 |
| 7 | loud_37 wrote: Why not? If the asset is likely to increase over the length of the mortgage, then it will get paid back. What's the issue? sparkychap - 2021-06-27 10:57:00 |
| 8 | If someone can’t pay the interest on a loan with such low interest rates then they have a problem Houston lakeview3 - 2021-06-27 11:00:00 |
| 9 | sparkychap wrote:
Because property only takes money away from an economy, it is not productive. loud_37 - 2021-06-27 11:01:00 |
| 10 | sparkychap wrote: you know what the issue is. It’s fuelled the housing market and it’s why we have young people struggling to buy a house and many people homeless. If you think that’s Ok then that says more about you than anything. lakeview3 - 2021-06-27 11:02:00 |
| 11 | lakeview3 wrote: If interest only is only 40% of the lending, then maybe its the other 60% you need to worry about. sparkychap - 2021-06-27 11:04:00 |
| 12 | sparkychap wrote: as I said in my previous post, if you think it’s funny then that says more about you than anything. lakeview3 - 2021-06-27 11:05:00 |
| 13 | lakeview3 wrote: Go back to bed, dear. sparkychap - 2021-06-27 11:06:00 |
| 14 | loud_37 wrote: So what else would you want people to do with their savings? sparkychap - 2021-06-27 11:07:00 |
| 15 | lakeview3 wrote:
Why do you always attack people, I'm after genuine reasons so I can understand why things are the way they are. loud_37 - 2021-06-27 11:07:00 |
| 16 | sparkychap wrote:
Invest in companies that provide jobs. loud_37 - 2021-06-27 11:08:00 |
| 17 | loud_37 wrote: And how would the average Joe / Josephine do that? This is a genuine question that I've been pondering for a while. Edited by sparkychap at 11:15 am, Sun 27 Jun sparkychap - 2021-06-27 11:09:00 |
| 18 | Shame on the Reserve bank, shame on the Government and shame on the banks for enabling and allowing this. Don’t act all innocent that New Zealand has one of the highest rates of mental health and suicide in the developed world and also one of the highest housing costs in relation to income. These things are directly related. Anyone who thinks it’s OK needs to take a good hard look at themselves. And don’t think it won’t affect you because it will. It’s just a matter of time. lakeview3 - 2021-06-27 11:11:00 |
| 19 | loud_37 wrote: i wasn’t directing it at ypu and the reason things are the way they are is largely because of greed, and specifically from certain groups of people who have been controlling things. lakeview3 - 2021-06-27 11:12:00 |
| 20 | Oh and if anyone believes there’s a genuine shortage of building materials then think again. The supply of those is being manipulated as well. lakeview3 - 2021-06-27 11:14:00 |
| 21 | sparkychap wrote:
Not sure, as I'm not sure if buying stocks in a company actually helps get jobs. I'm just a layman trying to work though things. loud_37 - 2021-06-27 11:16:00 |
| 22 | loud_37 wrote: Absolutely, I agree - investing in shares is just buying pieces of (virtual) paper off someone else who probably bought it off someone else. Apart from when a business floats on the market, does a share release or sells their own shares, the company itself doesn't get my money. Don't get me wrong, I'm all for shareholding but again investing in Wall Street is more likely to bet me a profit than the NZX...(insert advert for Hatch here) sparkychap - 2021-06-27 11:19:00 |
| 23 | loud_37 wrote:
Much better way would be to limit borrowing to a low multiple of earned income (excluding rental payments) just as it used to be, you know before runaway house price inflation caused by cheap money being continually pumped into the market to the benefit of big banks in order to create an illusion of wealth and success. I suggest 3x the first income plus 1x the second, no BOM&D, no gifted deposits, no monkeying around. Anyone fancy a $500,000 house in Wellington and the opportunity to spend the rest of your income on living? Remember those days? deendon1 - 2021-06-27 12:23:00 |
| 24 | sparkychap wrote:
With a house it could also be seen as a piece of title paper. It allows you to do certain things within that perimeter which can change depending on the rules of the game at any given time. rayonline_tm - 2021-06-27 13:29:00 |
| 25 | deendon1 wrote: i reckon lakeview3 - 2021-06-27 13:42:00 |
| 26 | lakeview3 wrote: apollo11 - 2021-06-27 14:33:00 |
| 27 | apollo11 wrote: it’s all part of the big ‘plan’. We of all countries shouldn’t be worrying about of lot of this but since we no longer process timber like we used to we are now in the ridiculous situation of having to import many things. I am a bit out of the loop now but do we not produce ply in NZ anymore???? lakeview3 - 2021-06-27 14:53:00 |
| 28 | lakeview3 wrote: apollo11 - 2021-06-27 15:04:00 |
| 29 | lakeview3 wrote: what is this “big plan”? sparkychap - 2021-06-27 15:16:00 |
| 30 | apollo11 wrote: And red stag in Rotorua to name another. sparkychap - 2021-06-27 15:19:00 |
| 31 | apollo11 wrote: have the prices gone up also? lakeview3 - 2021-06-27 15:20:00 |
| 32 | sparkychap wrote: to limit supply and drive prices up lakeview3 - 2021-06-27 15:20:00 |
| 33 | Fletchers have had a pretty good run on the NZX50 of late funkydunky - 2021-06-27 16:37:00 |
| 34 | lakeview3 wrote: No lack of supply of tinfoil although windows, doors, door furniture and steel reinforcing beams are also in short supply.. sparkychap - 2021-06-27 17:09:00 |
| 35 | lakeview3 wrote: apollo11 - 2021-06-27 17:42:00 |
| 36 | loud_37 wrote: Hard to grow paying principle + tax. The business grows from equity better than from cashflow. 3tomany - 2021-06-27 22:16:00 |
| 37 | OP i will go into more detail for you. I have paid interest only for most of my 18 years in business. The first big mortgage i took in 2003 was 70% debt that by 2008 was only 30% debt having never paid a cent in principle. In 2008 i bought another property and pushed my debt back up to 60% now i am back to only 20% debt. Paying principle is a mugs game. 3tomany - 2021-06-27 22:27:00 |
| 38 | 3tomany wrote: We’ve had interest only for almost all our borrowing for 35+ years. We will be mortgage free within a year. There no point to paying P&I for investment properties. The banks are getting tough on IO though. Last time we fixed with ANZ we tried to roll 2 loans into one. The manager suggested we not do it as it’s very difficult to get IO now. That was ANZ a year ago. Our 2 loans with ANZ end altogether in 2024 and 2026. So we will pay off our mortgages before then Edited by princess52 at 2:28 pm, Wed 30 Jun princess52 - 2021-06-30 14:28:00 |
| 39 | apollo11 wrote: And because Chinese Interests own most of the forests, most of the payment never sees the shores of NZ. Just enough to pay the contractors vital to felling and transporting the logs to the ports. Manipulation at its best. brouser3 - 2021-07-01 17:33:00 |
| 40 | princess52 wrote:
How have you paid off your mortgage when it was interest only? loud_37 - 2021-07-01 19:09:00 |
| 41 | 3tomany wrote:
Maybe i'm a mug as i paid off both properties in 10 years so I have paid a lot less and don't need to pay anything now. loud_37 - 2021-07-01 19:11:00 |
| 42 | loud_37 wrote:
maybe by when they sell the properties..so for eg they buy one house for $500k they sell 15 years later for $1 million (im just throwing figures out there) making around 500k profit? cathi - 2021-07-01 21:36:00 |
| 43 | cathi wrote:
Just throwing it out there too, how much interest did they pay over that time? One is gross profit ($500k) smallwoods - 2021-07-02 08:29:00 |
| 44 | apollo11 wrote:
Not true, Juken also supply NZ through Lumber Link smallwoods - 2021-07-02 08:30:00 |
| 45 | brouser3 wrote:
Hmm, not quite. smallwoods - 2021-07-02 08:35:00 |
