Looking to buy
Question from Rebecca updated on 28th June 2015:
We are looking to buy in Ashburton, around the $250,000 to $300,000 price range and have a 20% deposit. I am currently trying to decide which provider to get a pre-approved loan with. This is where I have become completely stuck. We are investing for long term gain, but would like to be able to use the equity to purchase future property. In this case is it better to have an interest only loan? And keep our savings for further properties. Or is it best to pay off more of the loan and then use the equity for future properties? In either case what is the best way to go with interest, fixed or floating? And what about the off-set loans? I am currently in a well paying job where this option would be good, but I only plan to stay in this job for this year. Would it then cost to change the loan to a different set up? I also am a non-tax resident currently, what effect would this have on the property? Or would buying effect my tax status?
Our expert Kris Pedersen responded:
There is too little I know about your position to be able to completely answer some of your queries however going off your stated aim to purchase more property then if your cashflow is good having the mortgage on a principal and interest basis, and putting your savings into it is definitely going to assist your equity levels making it easier to get into the next property. I would recommend looking to structure the first purchase at an 80% LVR however having the equivalent amount of what you have in savings structured a as revolving credit so you can put these funds into this. In most cases we'd be recommending fixed rates loan as even with the OCR reduction they are quite a bit cheaper than floating however I do note that your income situation is changing in 12 months time so depending on how your income looks after this may depend on exactly how you want to set this up.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz