Restructuring mortgage for minor dwelling
Question from JC updated on 4th November 2013:
Hello there, my partner and I have a house in Green Bay and are looking to add a minor dwelling. We would move in it and rent our three-bedroom bungalow house. We have been approved a $150,000 loan on top of our existing mortgage with the BNZ for it. What is the best way to set up the mortgage repayments? The numbers are property QV about $550,000, we still owe $243,000 on a 25-year mortgage with no other debts and rental income would be $480 to $500 per week. Should we get revolving facility at 5.99% versus 5.74% floating or fixing some? Should we pay back as much as possible in 15 years rather than 25? Should we see a mortgage broker instead of our existing bank? We own a new landscape business but no salary out of it just yet. We have bought most of our tools. I get the main income from my main employment of about $70,000 per annum. We have an accountant to do our tax returns. If there are too many question could you please recommend us a financial adviser? Thank you for your help. Kind regards.
Our expert Kris Pedersen responded:
Hi JC, as I am a financial adviser who works in this part of the market I'll let you guess who I'm going to recommend :) Based off the information provided I'd use the revolving credit until the funds have been utilised and then probably convert it to the cheaper term-loan option. I don't have enough information here in regards to both your business and personal investment goals to recommend whether paying it off more aggressively or not is a better idea. You will have a better understanding on what your cashflow requirements are going to be like and if it is likely to get tight at all you are better to go on the longer term but potentially keep some of the debt floating (once you have fully drawn down the revolving credit facility) so you can make lump sum payments or still structure the payments to pay it off in 15 years but in doing so retain the ability to reduce the payments if your cashflow needs require you to do this. Thanks, Kris Pedersen
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz