Invest or reduce loan?

Murtuza asks:
(updated on Wednesday, May 27th 2020)

I own a home worth $875,000 in today’s market and I have a mortgage of $540,000. I also have savings around $150,000. I was looking at the option of investing in a property at around $700,000. By borrowing on my equity and using my savings I should be able to get 30-40% deposit for investing. I am self-employed, so what’s the best option here in terms of tax and financial benefit long term? Should I use my savings to reduce my personal loan or put it into investing?

 

 

Our Experts Answer:

It is definitely worth getting tax advice here to make sure. But my understanding is that you would be best to look initially to use your funds to reduce your personal mortgage and then reborrow for the investment purpose. That would mean 100% of the borrowings will be for the investment and can be related to the tax benefits. Given you are self-employed, make sure that you talk to an accountant in regards to this as there may be other tips worth taking into consideration as well.

 

 

 

Heartland Bank - Online 1.85
ICBC 2.15
SBS Bank Special 2.19
HSBC Premier 2.19
HSBC Special 2.25
Kainga Ora - First Home Buyer Special 2.25
The Co-operative Bank - First Home Special 2.29
Kiwibank Special 2.49
The Co-operative Bank - Owner Occ 2.49
ANZ Special 2.50
TSB Special 2.50
Heartland Bank - Online 2.35
ICBC 2.35
HSBC Premier 2.45
Kiwibank Special 2.49
SBS Bank Special 2.49
China Construction Bank Special 2.65
Resimac 2.79
TSB Special 2.89
The Co-operative Bank - Owner Occ 2.89
Westpac Special 2.89
ANZ Special 2.90
China Construction Bank Special 2.99
HSBC Premier 3.19
ICBC 3.19
Kainga Ora 3.37
Bluestone 3.54
Select Home Loans 3.54
Resimac 3.54
SBS Bank Special 3.59
The Co-operative Bank - Owner Occ 3.79
TSB Special 3.79
Westpac Special 3.79
ANZ Blueprint to Build 1.68
ASB Back My Build 1.79
Heartland Bank - Online 1.95
Resimac 3.39
Bluestone 3.49
Select Home Loans 3.49
ICBC 3.69
Kiwibank Special 3.75
Kiwibank 3.75
Kiwibank - Offset 3.75
The Co-operative Bank - Owner Occ 4.40