'Revolving Credit' type mortages - anyone done or doing this?

And have any advice to share? It seems fairly straightforward, if you're very disciplined with your finances... it's new to us coming from the US where such mortgages (or even overdraughts!) are not so common, it sounds a good way to pay down one's mortgage sooner.

We were looking at this one in particular, after doing a lot of reading. We were told by some friends who used a company to help the through it (but it cost them $5000!), but it seems to me to be doable on one's own with the right bank...

www.sovereign.co.nz/section129.aspx

Cheers
Andrea
Oxford

We have a revolving credit mortgage with SBS ( www.sbs.net.nz/personal/our-products/loans/flexi-loan.aspx ) and it's been great. We can pay off chunks of mortgage when tax refunds and bonuses come through and if we wanted to do something to the house we had the available funds to do it. We have a chequebook on the account and can use Internet banking so can put all our incomings into the account until we need to spend them.

You do have to be disciplined but no more so than paying off your credit card each month...

Cheers
Kate

we use new zealand home loans. it is very similar to a revolving credit system, but you still pay a regular minimum amount so that if you are not disiplined you cannot be any worse off than you would have been with a normal mortgage. however if you are disiplined you can pay it off many years sooner.

the company is awesome, would not use anyone else again! nz company too.

Have had a BNZ Rapid Repay from about the time they invented it (several properties ago). Yes you do have to keep an eye on it but it works well if you do. We also put everything on Credit Card and pay it off in full on the due date which gives you another month interest free.

Do not pay anyone large lumps of cash to organise your money for you (unless you really have problems with your spending habits and need monitoring) I've talked to several people who have done this and what they got for the money was basically pretty much what a good personal banker would give you for free (or a good budgeting book would tell you for less than $30)

$150 saw us set up a rapid repay with the BNZ (we are customers anyhow but its the general fee) and yes its great. I whip everything weekly that i can onto it but draw down in bulk for the expenditure on the reno house.

However this is the big however we have lines of credit against our aussie house and its SO easy to justify that new BBQ, that new TV or that new outdoor setting. In those days we were self employed and knew that our money was up and down, but geese you do have to be disclipined and if anyone in your family isn't good with credit cards (or has a gambling problem) then don't get a revolving credit facility on the house.

swaggie;295778 wrote: but geese you do have to be disclipined and if anyone in your family isn't good with credit cards (or has a gambling problem) then don't get a revolving credit facility on the house.

i am not very disciplined, which is why the new zeland home loans system is great for us.... i have the chance to make a big difference to our finances with no way to stuff it up!

If you need to know that you have access to the money you're putting into your mortgage in the event that you need it then it can be handy. If you don't, then the rates for a regular floating mortgage are usually a bit less than a revolving credit one and often there are no limits on lump sum repayments for floating mortgages when you're ready(check first to be sure). When we have mortgages on floating rates, we can just email our bank and organise for them to take x amount from account y to pay towards mortgage z. So its pretty simple and not much harder than transferring funds into your revolving credit account.

If you do decide to go that way, think of the account more like a 'savings' account. So keep as much dosh in there as you can at all times, do stuff like pay for your normal stuff on your credit card so your money can sit on your mortgage account for as long as possible or keep only a basic amount in your cheque accounts. (ie: don't think of only putting some money in there once in a while, do the reverse and think of only taking money OUT once in a while!)

With some of your recent questions I'm guessing you're planning some renovation Having the revolving credit can mean that you don't have to go back to the bank and ask for another loan when you're ready to start. This can make things simpler. Have Mike check out the employee benefits, there used to be a small discount from National bank on their 'flexi' rate (flexi- being their revolving credit interest rate), but then kiwibank seems to have better rates most of the time.

Andrea;295762 wrote: We were looking at this one in particular, after doing a lot of reading. We were told by some friends who used a company to help the through it (but it cost them $5000!), but it seems to me to be doable on one's own with the right bank...

www.sovereign.co.nz/section129.aspx

It may have cost them $5000 because they were breaking an existing fixed rate loan? Penalties? Because as others have said, setting up a revolving credit from a floating loan is easy peasy. You will probably pay a wee bit higher in interest though for the privilege...

Is your existing loan with Sovereign? I would never think of them for loans, as far as I know their strength is as an insurer rather than a 'bank'. I would check fees and interest rates through them very carefully cf other outfits...

We had one for a year or so through the ANZ. We reverted to the traditional home loan with an every day account in the end for psychological reasons on my part. I felt that everything was debt and any extra money we got, like for a bonus from work or when we sold a car, was swallowed up in the one enormous black hole that was our bank account. I felt guilty for every non-essential cent I spent, and still we had a huge negative figure in our bank account.

Financially, it probably makes a lot of sense if you have the discipline to work at consistently reducing the debt because you pay less interest in the long run, if you don't happen to have a mentality like mine.

Good idea if you are planning big outgoings . It means you do not have to check with the bank each time, you have already passed their test for eligibility.
I had one years ago and remember paying a fee for the unused portion of my loan, the amount they were "holding" incase I drew it down without having to advise them [].
Currently Nat Bank is only 5.95 p/cent.

Depending on what you are wanting it for, have you considered a separate mortgage-based OD for the amount you want, so that your existing mortgage doesn't change...? Then you can't possibly go over your budget!

I have just moved to something along those lines and feel uncomfortable with it. In theory, it makes perfect sense....

I have a slightly different version of this with the BNZ, and I love it. Its called their Total Money account, and you basically group together a portion of your mortgage, plus up to 10 other accounts. The money all stays in the separate accounts, and I make normal repayments on the mortgage, but the interest is only charged on the net balance of all the accounts.

As I have a lot of Tax money put aside, plus I get paid in lump sums somewhat randomly, I make big savings on my mortgage interest. Also, I don't have to worry too much about transferring money around, or getting term deposits, as the interest rates on all the accounts is the same 5.69%. And I believe, as I'm not 'earning' interest on my savings, I won't have to pay tax on it.

Definintely worth a look if you're self-employed with a mortgage.

Our friends used a 'service' to help step them through it, hence the $5000 (which I really can't justify from my perspective). I don't think there were fees for them breaking with another bank... anyway, the other reason for looking around is we're with BNZ and Nat Bank (had been with BNZ for mortgage at first, but switched to NB when DH's employer had a 'deal' with them for switching the mortgage over when it was time). Not been happy with either customer service-wise, so have been looking around, as the mortgage is up again next year... and yes, Jen, we're planning to extend the house (it's just too small), and the mortgage we have isn't huge, but we'd still like to be able to make it go away before we're old and grey...

Thanks for lots to think about! Over the years we've become fairly self-disciplined with finances, so wouldn't be too hard to get brains fully wrapped around what looks like a G I A N T over-draught!

Cheers
Andrea
Oxford

Interesting post Gracelands. I'm also s/e with a mortgage and what you're describing sounds perfect! I'm considering moving banks and BNZ hadn't been on my list because I left there several years ago after a string of stupid mistakes on their part, but perhaps they're worth a second look.