Loan structure options
Question from Julie updated on 8th August 2016:
I'm wondering what the best loan structure is for me. I've decided to rent out my house (which has 10% of the mortgage to be paid off on a principle+interest loan) and am about to purchase another two rentals (one title with two rentals).
How should I structure my loans? I would like to use interest-only on the two new rentals. Should I change my initial house to an interest only or continue overpaying the mortgage in an attempt to pay it off?
As I am flatting again, I may look at purchasing a home late in the year. However, it may be a better opportunity to purchase another rental before the end of the year if possible.
Our expert Kris Pedersen responded:
I am presuming you will have no personal debt once you move out of your property and that all debt you hold will be tax deductible (best to check this with an accountant). If this is the case then it is really a situation where you need to weigh up whether debt reduction or increased cash flow is more important to you.
One option is to structure part of the mortgage as either a floating, revolving credit or an offset facility where you can pay more should you decide to but can reduce your payments back to the interest only amounts should you want to relax your required payment amounts.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz