Mortgage optimisation

Ange asks:
(updated on Wednesday, January 07th 2015)

I have two mortgages over my rental and one mortgage over my owner occupied home. Is it best to have the rental loans at the max of 30 years (principal and interest) and my owner occupied one at 20 years? Or should I have all three mortgages at 25 years? I want to make best use of the tax benefits. Thanks,

Our Experts Answer:

Hi Ange, do get personalised tax advice but generally the interest connected to your rental property is tax deductible and the mortgage connected to your owner occupied home is not. Note that if some of the mortgage against your home has been used to purchase or maintain the rental then part of this may also be deductible. My normal recommendation if you are not looking to purchase any more property in the short term would be to figure out what the maximum monthly payments are that you can make across the board. Then put the rental properties on 30 year interest only and whatever the remainder is on principal and interest on your own home. There is a good calculator on mortgagerates.co.nz for you to use to figure out what loan term suits you best. We often recommend setting the actual loan term for a bit longer and increasing the payments by paying more into a revolving credit facility thus if you have a life change you can reduce payments yourself without having to get bank approval. If you would like me to answer further please email me at kris@krispedersen.co.nz.Thanks Kris Pedersen

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