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  1. #1

    Question change mortgage with principle + interest way to Interest only

    Dear all, I’m currently living overseas. I’m having few properties now but all of them are having mortgages in principle + interest way. I’m planning to return NZ in 2 or 3 years. After returning, I want to change all mortgages into “interest” only. Because now each property rent can cover its own mortgage, I can get the more savings if I can change “principle + interest” way into “interest” only. After returning NZ, I wish I could stop working. I think I might survive from the rents and some cash savings.

    Do you think banks will allow me to do so? If not, do you think what kinds of conditions or requirements I must meet?

    Thank you very much in advance for your advice!

  2. #2
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    824

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    Quote Originally Posted by floatingisland View Post
    Dear all, I’m currently living overseas. I’m having few properties now but all of them are having mortgages in principle + interest way. I’m planning to return NZ in 2 or 3 years. After returning, I want to change all mortgages into “interest” only. Because now each property rent can cover its own mortgage, I can get the more savings if I can change “principle + interest” way into “interest” only. After returning NZ, I wish I could stop working. I think I might survive from the rents and some cash savings.

    Do you think banks will allow me to do so? If not, do you think what kinds of conditions or requirements I must meet?

    Thank you very much in advance for your advice!
    Yes
    I just asked the same question this week
    LVR under 40%
    Interest cover over two (net rent to interest)
    Registered Valuations no older than 3 years
    (In the net rent calculation I do take a $100k salary for management but I assume being overseas you currently pay someone to manage the properties which would not be necessary when you return)
    Last edited by Beano; 05-10-2019 at 09:57 PM.

  3. #3
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,628

    Default

    Hi,

    It depends on your situation and the banks criteria at the time.

    NOTE - the bank criteria and rules might change over time. So they might allow interest only for a while, and then they might change there mind in a few years.

    Having multiple banks can help with this!

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  4. #4
    Join Date
    Jul 2017
    Posts
    287

    Default

    Quote Originally Posted by Beano View Post
    Yes
    I just asked the same question this week
    LVR under 40%
    Interest cover over two (net rent to interest)
    Registered Valuations no older than 3 years
    (In the net rent calculation I do take a $100k salary for management but I assume being overseas you currently pay someone to manage the properties which would not be necessary when you return)

    Beano,

    A) Can you clarify further for floatingisland? Are those lending terms / covenants for:
    1) retail banking customers
    2) business banking customers
    3) commercial banking customers

    Different customer classification types are subject to different lending terms and covenants by banks.

    Not sure what the thresholds are for each customer classification type - some banks use turnover, some banks use amount of assets, some banks use amount of borrowings as I understand.

    As I understand, business banking customers and commercial banking customers are also subject to account reviews (annually I think, as they need to submit financial statements)

    Floatingisland might be a different classification of banking customer than you.

    B) Just to reconfirm
    1) maximum LVR is 40%? or
    2) minimum equity is 40%?

    Recall that maximum LVR previously was 60% for business / commercial banking customers.
    Last edited by Chris W; 07-10-2019 at 11:28 PM.

  5. #5
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    824

    Default

    Quote Originally Posted by Chris W View Post
    Beano,

    A) Can you clarify further for floatingisland? Are those lending terms / covenants for:
    1) retail banking customers
    2) business banking customers
    3) commercial banking customers

    Different customer classification types are subject to different lending terms and covenants by banks.

    Not sure what the thresholds are for each customer classification type - some banks use turnover, some banks use amount of assets, some banks use amount of borrowings as I understand.

    As I understand, business banking customers and commercial banking customers are also subject to account reviews (annually I think, as they need to submit financial statements)

    Floatingisland might be a different classification of banking customer than you.

    B) Just to reconfirm
    1) maximum LVR is 40%? or
    2) minimum equity is 40%?

    Recall that maximum LVR previously was 60% for business / commercial banking customers.
    1)retail banking customers
    2) business banking customers
    3) commercial banking customers
    I would say I would be a business customer but I am not certain if this affects the property loans as the business is the property rentals.
    I am commenting on when do the bank not require principal because I am at 40pc lvr but it seems there are other hoops to also to jump over.
    Anyway when I was at 70 lvr my capital repayments were about $3.3k per day but they have dropped to a couple hundred dollars now.


 

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