Mortgage split questions

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Forums › Finance and wealth management › Mortgage split questions

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BlinkyBill

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#2661903 23-Feb-2021 17:37

If your bank is useless, maybe consider changing banks. A new bank will probably incentivise you to do so, $5-10k or more depending on the mortgage level.

I banked with Westpac for 30 years, and they didn’t want to help me with a personal mortgage (as in, they wouldn’t make an appointment to discuss within a timeframe that suited me) so I moved across the road to ANZ who dropped everything to help me out, literally. And ANZ gave me $10k to do it, as long as I stuck with them for 2 years of personal banking.

As well as losing my personal banking Westpac lost my business banking as well.

As regards your account setup, I don’t know why people get too elaborate on revolving credits, split mortgages and so on. I would fix anything you can’t pay down, and float what you plan to pay down over the fix period, and review every time the fix period expires. Then keep business and personal cashflow separate. That prevents you dipping into gst/tax payment funds for personal spending, which is tempting for some.

MadEngineer

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#2661904 23-Feb-2021 17:42

Westpac have been amazeballs for us. When we applied, ANZ kept dragging the chain especially with the application to withdraw our Kiwisaver. Kiwibank went silly and wanted evidence of our expenses for a period of time when there were none due to being on holiday overseas for three months. Westpac took 10 minutes to input the data and minutes later gave an OK, pending evidence we'd already provided to Kiwibank. This was over 10 years ago now mind you :p

You're not on Atlantis anymore, Duncan Idaho.

BlinkyBill

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#2661907 23-Feb-2021 18:00

My experience with Westpac was almost exactly 2 years ago. 10 years ago Westpac used to take me to lunch twice a year!

jonherries

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#2661943 23-Feb-2021 20:11

martyyn:
duckDecoy:

For us if you put it into A3 (the mortgage) its gone forever, the mortgage is permanently decreased by that amount, so not the same as your revolving. On reflection the Total Money concept my not work for you if you want a permanent unchanging line of credit available that you can draw down on again at any time, the A3 account would take regular monthly payments and the mortgage permanently decreases each month by that amount. But what it does do is tie A1 and A2 and A4 into the mortgage so you pay less interest and everything is easy and compartmentalised.

I think we're on the same page now. I think your suggestion would allow us to offset A3 and just any put extra money into A4. At the end of the term it would tell us how much we had an extra during the term which might help make a decision next year.

If we revolve A3 we just put it in but don't know how much we've actually put in without tracking the payments.

Edit: Sorry for clarity we do what @duckDecoy suggests our A3 has been on floating for the past 12 months and is part of the offset .

Jon

duckDecoy

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#2661948 23-Feb-2021 20:54

blackjack17:

I know you said you really aren't interested but if A4 was a sharesies/simplicity/milford/juno investment (non-kiwisaver) account you would be making interest while still being able to pull it out for new cars / renovations / emergencies. While you wouldn't have instant access you can generally get it out in a couple of days.

If you think you will need access to your money in less than 5-10 years then this is not a good option. Shares are a long term investment and if they take a dip can take a while to recover.

Im not saying they wont give a good return across 5-10 years, what I am saying is they might suffer a crash that needs time to recover, and that might be just about the time you need the $$$. If you cannot wait out that storm then don't do it.

Kiwifruta

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#2663260 26-Feb-2021 22:27

I'm an ex-commercial banker.

Your A1 account is for working capital, it covers short term (<12 months) financial needs of the business.

Basically, a business incurs expenses (buying inventory, manufacturing a product, producing a service) before receiving cash from sales. Working capital covers these costs. Often when a business is new this will be funded by a bank overdraft (or revolving credit in your case). It's quite normal for this account to fluctuate between a negative balance and a positive balance each month.

A2 in your case is also short term finance. Many business owners do you what do and keep it in an account separate from the working capital account.

A3 is long term (>12 months) debt to fund the purchase of fixed assets (e.g. machines that produce widgets, vehicles, the business premises)

Generally, over time as a business sales its working capital needs increase. This can be funded by increasing the overdraft limit of A1, or from accumulated profits. In your case, it seems your business profits are now funding your working capital needs and you no longer need the overdraft (revolving credit) limit.

I recommend speaking with an accountant who gives business advice (not one whose only purpose is to lower your tax bill). Explain to them your business plans, and forecast out what your businesses financial needs are over

1) the next 12 months (called a 12 month cashflow forecast), this will let you know what your working capital needs are.

2) the next 3-5 years, to know what your long term financial needs are.

From this it will become clearer what to do with your accounts, 1 & 2 are also very helpful if you need to approach the bank for more funding.
Do you have a business banker or a regular branch banker? The regular branch home lenders and even branch managers generally aren't skilled in business lending so get a business banker if you can.

I don't want to give financial advice because I am no longer an AFA, and probably risk breaking the law.

martyyn

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#2666937 2-Mar-2021 19:50

Thanks for all the replies.

I want to keep the loan amounts available for a house reno in the next year or two so I think I may just make A3 a revolving as well and see where we are in 6-12 months.

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jonb

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#2666952 2-Mar-2021 20:53

I wanted to pay more on my mortgage this next year, and my advisor did it into 2 splits of equal on 12months fixed, so can add additional payments. (also with 100k revolving credit facility that aim not to use). The actual mortgages themselves are on a fairly long term e.g. 20 years, but allow upto $1000 extra per month in additional payments, per split. Thats with ASB, so can reduce the term to like 7 years equivalent myself.

martyyn

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#2682479 29-Mar-2021 13:13

So, I applied to have A3 turned into another revolving and they've taken the best part of three weeks to reject the application. They only allow a "certain percentage" to be on revolving but haven't said what that means. A percentage of what exactly ?

The total revolving (A1+A2+A3) we're asking for is 20% of our current capital and currently A1 and A2 are positive.

I don't get it.

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