Refinance and restructure?
Question from Jay updated on 24th September 2012:
I have a rental which was once the family home four years ago. I haven't set up the mortgages properly and have a positively geared rental mortgaged at about 50% of its GV value. Can I refinance and move some of my home mortgage on to the rental? If so, what would that involve?
Our expert Kris Pedersen responded:
What we recommend doing here is, firstly, make sure you are using different banks for both your owner occupied property and the investment property. This removes the risk that comes from cross securing the mortgages together. Secondly, I would be looking to gear the investment property to about 80% of its value. The reason I normally don't go higher than this is most lenders won't let you go interest only if you are above 80% and you are better to pay interest only here and concentrate on paying principal down on the mortgage connected to your own residence. Also you will often find that lenders are not as competitive when lending above 80% LVR so you want to make sure that you get the best pricing possible Thirdly, make sure that you seek advice from your accountant in regards to how you should be structuring your mortgages as part of the remaining debt on your own home may be able to be structured for better tax efficiency as well.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz