30 year interest only mortgages

[PTWhatAGreatForum]

Westpac's new 30-year, interest-only mortgage has been decried as irresponsible and likely to fuel property investor speculation.
Details of the new loan product were discreetly fed to mortgage broker channels in recent weeks. The offering is a major shake-up to the market, with the term three to six times as long as the maximum allowed by rival banks.
Wellington mortgage broker Simon Rule said the three-decade loan had surprised brokers and rival lenders, and was "disappointing" to see.

"You're basically encouraging borrowers not to make any principal repayments on their mortgage whatsoever," he said.
Once the term is up, borrowers can either repay the loan in full or switch to a standard mortgage, implying a total length of 50 years.

Full article: http://www.stuff.co.nz/business/mone...-irresponsible

[Viking]

Good thing. Stop the ANZ threaten me every time I want to extend my loans. Maybe they will see the light and keep lending insted of us having to change banks every few years.
No reason why we should repay the loan when there is better things we can do with the money.
Besides inflation becomes your very best friend.

[speights boy]

This may increase the calls to implement the indexation recommendation of the Savings Working Group.

IE: No tax paid on the CPI component of interest earnt on savings, and
CPI component of interest paid on mortgage unable to be claimed as an expense.

[Damap]

Finally they adopt the USA model, yay for us. Terrible for New Zealand but yay for investors.

[Bob Kane]

I don't see any problem with this.
Sounds like a reporter trying to make a 'bad news' story.

[ivanp]

The reporter doesn't know what he is writing about: this type of loan is available in NZ for a while.

[Damap]

It does really encourage speculation that is the risk.

[Wayne]

Westpac just keep rolling over my IO loan term by term.
They look at them, decide there is nothing to see and extend the IO period.
So nothing changed really.

[PTILoveYou]

Won't matter, most investors are 'speculators' anyways, especially in Auckland.

[Learning]

Westpac just keep rolling over my IO loan term by term..

Dito for BNZ. When my 5 year IO came up I just rolled over to a new 5 year IO. However I have made a couple voluntary payments over the years but not enough to dent it.

[BigDreamer]

Hmm I'm curious how many people go for IO loans? I have been against it since I first started investing and have not had the need to go IO. Maybe I am missing something?

[Wayne]

The RBNZ have started collecting the data so they'll tell us in the next few months.

[elguapo]

Hmm I'm curious how many people go for IO loans? I have been against it since I first started investing and have not had the need to go IO. Maybe I am missing something?

I opt for a mix of repayment and IO. I'd rather repay one loan faster than two slower. I think a reasonable level of repayment is a better strategy long term than trying to do it all on IO and hope the values keep going up.

[Learning]

Hmm I'm curious how many people go for IO loans? I have been against it since I first started investing and have not had the need to go IO. Maybe I am missing something?

By having my IPs on IO I can sink all spare cash in to repaying the mortgage on my personal home much faster.

IP mortgage interest is tax-deductible, personal is not. I lent my IP company the deposit to buy the IP's so when IP company's account has some extra cash it makes a loan repayment to me which goes straight off my personal mortgage. Eventually my personal mortgage or IP company's loan to me will be fully repaid and then I'll switch to Cap-and-I mortgages all the way.

[ivanp]

Hmm I'm curious how many people go for IO loans? I have been against it since I first started investing and have not had the need to go IO. Maybe I am missing something?

For cashflow, obviously. Maybe not so necessary if you are outside of Auckland though...