tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, March 29th, 10:40AM

Mortgages

Mortgage Rates Daily Commentary
Thursday 28 March 2024  Add your comment
Lifetime Home Masterclass

New Zealand’s first debt-free home equity release income solution, Lifetime Home allows Kiwi retirees aged 70 and above to access the wealth tied up in their home to bolster their retirement income.

Lifetime Home requires no mortgage, no debt, and no interest payments. Instead, it offers certainty and financial peace of mind when it’s needed most.

Master Class for Financial and Mortgage Advisers
Join Lifetime’s founder and managing director, Ralph Stewart and Chief Marketing Officer, Chelsea Devlin to find out everything you need to know about Lifetime Home.

Lifetime Home master classes will be held in-person in Christchurch, Wellington, and Auckland, and online.

To book your tickets CLICK HERE

rss
Latest Headlines

Revolving mortgages get the once-over

Are revolving credit facilities a blessing or a bugbear?

Thursday, September 14th 2000, 4:49PM

by Paul McBeth

Are revolving credit facilities a blessing or a bugbear?

Now offered by a swag of lenders, these mortgages are effectively large overdrafts at floating mortgage rates. They let you repay as much money as you like off your mortgage, but you're still able to redraw funds whenever you want.

Therefore, whenever you tip in extra cash you've reduced your daily outstanding balance and so trimmed back your overall interest bill.

The catch is you actually have to have that extra cash every now and then to get the benefit (there are generally extra fees associated with revolving mortgages). That's why they're often recommended for people who get paid on commission, whose income is "lumpy" or who have to set aside large sums for provisional tax. They can put that money to work reducing their mortgage interest bill, but still withdraw it when needed.

The risk? It can be major temptation: because you can draw out extra money whenever you want, there's the chance you don't end up reducing your overall borrowing. The other risk is your exposure to interest rate movements, as these mortgages are on a floating rate.

In a recent Mortgage Services newsletter, Forsyth Barr suggests you can reduce the interest rate risk by "hedging your bets". That is, you split the loan and have a fixed component funded from the revolving loan. You still have the flexibility to repay and redraw but part of your loan is locked into a fixed rate.

Forsyth Barr also points out the savings to be had by applying spare funds to your mortgage versus parking them in a savings account. Assuming your savings account earns 4.0 per cent (that's more like 2.68 per cent after tax, they say), and floating mortgage rates are averaging 8.56 per cent (which you're paying out of after-tax earnings). Forsyth Barr says "Instead of earning 2.68 per cent you are saving 8.56 per cent! To be better off saving, you would have to be earning around 12.78 per cent pre-tax".

Meanwhile, the Consumers' Institute warns that that revolving credit mortgages are a common tool of mortgage reduction agencies. It says these firms may encourage people to place their entire income on the facility, live off a credit card as much as possible and use the revolving credit facility to pay off the card in full each month just before interest is charged.

That should reduce your overall interest bill as well as save you fees, as you no longer use cheque and savings accounts. However, in an article on its web-site, the Institute cite some "big snags" with these schemes. One we've already covered and that's the temptation to keep borrowing.

However, the Institute says the biggest drawback (of using these schemes through mortgage reduction agencies) can be the fees. "The agencies typically charge thousands. Some even require their clients to pay a deposit before they investigate whether the client can save money. Yet you can sign up for very similar schemes with many banks and other mainstream lenders for a fraction of the cost."

Paul is a staff writer for Good Returns based in Wellington.

« It's Spring!Still down they go »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

Previous News

MORE NEWS»

News Bites
Compare Mortgage Rates
Compare
From
To
For

To graph multiple lenders, hold down Ctrl key while clicking in list box

Also compare rates to OCR
Find a Mortgage Broker

Add your company

Use map
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com