Personal savings present savvy loan option
Before you start house-hunting, you need to figure out how much you can afford to borrow. Part of those discussions with the bank will involve the structure a mortgage might take.
One of the more innovative is the Bank of New Zealand's TotalMoney combined savings and home loan option, which could shave years off your floating home loan by offsetting your savings against your mortgage.
For example, if your TotalMoney loan is $150,000 and you have $10,000 across your cheque and savings accounts, you'll pay interest on only $140,000 - equivalent to an interest reduction from 5.59 per cent to 5.22 per cent per annum. Repayments will remain the same, but the lower effective interest rate ups the proportion of the principal you're paying off. If savings are equivalent to the amount of the mortgage, you pay no interest at all.
You can offset total savings, some or none of them against the home loan and accrue credit interest on the pool of savings instead.
"TotalMoney is all about creating flexibility for our customers and allowing them to be in control of their money," says BNZ head of retail sales development, Monique Cairns.
Posted: 8 Mar 2010
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