Page 3 - December Newsletter papakura

Five Common Mortgage

Mistakes Continued..

Many people don't realise that an interest-only period actually chews into the loan term

itself, & that they'll need approval to extend an interest-only period. If you take out a 30-
year loan & sit for five years paying interest only, you'll only have the remaining 25 years

to pay off the principal. You might get caught out when you're requesting an extension,
because it's subject to the bank's approval. If the credit market tightens, it can be harder
to get approval.

SITTING ON A FIXED RATE
Often people set & forget their mortgage rates once they're

fixed. In a market like this one, with rates trending down,
it's worthwhile seeing if breaking & re-fixing your mortgage
might be right for you. The cost of the new interest rate

plus the break fee may work out better for you than your
existing rate, when it's compared over the remaining fixed

term.

FLOATING FOR TOO LONG
When rates trend downwards, people often sign up for a floating rate & sit & wait for a
lower fixed rate. That's not a great strategy & here is why. If you're floating at 5% for six

months while you wait for rates to drop, when you could've fixed at, say, 3.55% on a one
year rate, you'd end up paying an extra $725 in interest per $100,000 over that six

months. For you to be better off, the rate when you fix would need to be 0.725% lower
than the comparable one-year rate. That's 3.55% minus 0.725% , which is 2.57%. You'd
be lucky to get that.

&

P A P A K U R A continued over the page..
Life Property

is happily brought to you by
Chris Grantham 0274 960 959 c.grantham@barfoot.co.nz

Karen McGehan 027 296 1449 k.mcgehan@barfoot.co.nz