Positive cash flow investment mortgages

Do any of you know if 'positive cash flow investor mortgages' are available in Ireland ? These products have been available in Australia for example, to help property investors to remain cash positive in markets where capital gains and prices are high, but rents do not keep pace with mortgages and property price inflation in the short term. On a mortgage at a nominal rate of 6% interest for example, it allows you to split the interest payment rate across the term, for example 3% for the first 5 years followed by a higher rate further into the term when rents will have caught up with mortgage re-payments on the original principal amount, based on the assumption that the residential property market value will double every 7-10 years. These products allow negative gearing and positive cash flow which apparently has tax benefits also. Who has some background information ?

Are these annuity/repayment mortgages? If so then you might want to consider this thread about interest only mortgages for investment properties:

Interest only mortgage

These are also called negative amortization mortgages in the US. Thankfully you can't get them in Ireland (yet!).

Yikes!

Here's Wikipedia on negative amortisation for anybody (like me) who was baffled. Seems that the repayments below the actual interest rates at the beginning cause the excess unpaid interest to be capitalised. I wonder if this makes any sense here in Ireland since 100% of interest on property investment loans can be offset against rental income anyway?

Presumably the potential tax benefit is that, if your current rent is less than the interest repayments ("negative cashflow"), you might want to "defer" (capitalise) some of the interest, until rent catches up, to maximise your tax offset when (if!) rents do catch up.

Sure why bother making any repayments at all -- that way you won't have to pay interest on the interest!

Double Yikes!!

Those are some ugly ugly financial instruments..

Jonathan said:

to help property investors to remain cash positive in markets where capital gains and prices are high, but rents do not keep pace with mortgages and property price inflation in the short term.

Click to expand...

I love it! An instrument designed to support your investment when it's (unrealised) value has detached itself from fundamentals. (ssshh.. but that's an asset bubble..)

Hi Jonathon,
Have you got any information on which banks in Australia offer this product as I'm based in Australia and I'm looking at buying at least 1 investment property.

This product would be ideal for me as I want to stay cash flow positive initially and in a rising sydney rental market(current yields 5-6%) would cover full interest payments in 3-5 years.

Capital appreciation can look after itself as I'm buying 4 long term

Thanks MugsGame. I think Clubman has summed it up with the Negative Amortization explanation on Wikipedia, and the capitalisation of deferred interest payments. It's a strange product in my estimation and perhaps better suited to prospectors than investors. Macbri have a look at this link if you want to find out more.

[broken link removed]

Thanks for the link and see they have a seminar in sydney early March.

I like this product as I can knock 2% off interest rate enabling property to be cash flow positive straight away.
Rents are increasing dramatically in sydney at moment due to demographics,lack of supply and investors selling out.

Rents only need to increase 20% to make property I'm currently looking at pay for itself at normal interest rates-currently 7.3% here.

Property is a long term investment and if its' cash flow positive all the better.