What type of loan would you recommend - principle and interest or
interest only, and why?
Q.
Having recently paid off our mortgage, we are for the first time
in a long while in a position to save or invest funds that we
normally would have for mortgage payments. Trying to improve our
financial position, we would like to invest in the share market to
diversify our assets. What type of loan would you recommend -
principle and interest or interest only, and why?
A.
I prefer an interest only loan because the tax benefits do not
diminish over time, but if you do decide on this course of action
make sure you salary sacrifice extra money into your superannuation
to boost the balance so you will be able to pay off the loan when
you retire. If you are under 45 insurance bonds may be a better
option than superannuation because you do not lose access. The only
drawback is that money invested in insurance bonds must come from
after tax income.
Each week financial advisor Noel Whittaker answers your
questions.
