Revolving credit structure
Question from Treena updated on 25th February 2014:
We have borrowed against our rental property to build our own home. We currently have a $300,000 Orbit loan and have drawn down nearly $200,000 of it. What is the best way for us to structure the loan? Should we do an interest only loan and then save as much as possible to pay off lump sums?
Our expert Kris Pedersen responded:
Definitely take personal tax advice here as there may be some personal issues which you need to take into consideration in regards to how you structure things. I would however normally recommend that if the revolving credit facility is just against the rental property that you look to completely draw down all funds against it as to minimise the lending against your personal property. If lending is required against the personal property then ideally you should look to have it with a different lender to remove the cross security against the two properties.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz