30-year interest-only loan 'provides options'

Westpac should be congratulated for offering 30-year interest-only mortgages, one property commentator says.

Thursday, November 13th 2014, 12:00AM

by The Landlord

The loans have been called irresponsible by Wellington mortgage broker Simon Rule, who said they encouraged borrowers not to make any principal repayments whatsoever.

A 30-year interest-only term is about three times as long as the longest term on offer from other banks.

Westpac said the product was aimed at investors to give them the best opportunity to take advantage of tax benefits.

Investors can put their rental properties’ mortgages on interest-only mortgages, allowing them to make the entire repayment tax deductible, and focus on paying down the principal in their own home, the interest on which is not tax deductible.

Property commentator Olly Newland said the loans would suit investors seeking cashflow, steady returns and lower costs.

“This type of mortgage may not suit home owners who want to create a nest egg for retirement but at least a buyer/investor/homeowner has choices instead of constantly ducking and diving, fixing, floating and refinancing.”

Broker David Windler said it was not a new offer but had been highlighted with Westpac’s new emphasis on its property investment services.

“For property investors, which is who it’s designed for, it’s great. I don’t see a problem with it. Generally property investors have got a mortgage over their home so when we’re setting property investors up we also we do the investment loan interest only so it’s got a good chance of at least breaking even. Then their personal income goes to reducing their personal debt. It’s pretty normal practice.”

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