What to do with extra cash?

Question from Adrian updated on 29th November 2013:

We have two rental properties but only one is cashflow positive. Both are on interest only mortgages. Our own house is already mortgage free. If we have extra cash, would you recommend that we pay it towards the rental mortgages or put it in a term deposit of around a 4.10% interest rate? Thanks.

Our expert Kris Pedersen responded:

Hi Adrian, I would recommend considering to restructure part of the mortgage into a revolving credit and dump the cash into it. This way you are saving on the interest rate (rather than the bank benefiting from the margin you would suffer between the term deposit rate they pay you and the mortgage rate that they charge you) but can still access the funds if you need them. Regards, 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

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