Q: Our current mortgage is $600,000 fixed at 6.99 per cent for a year. We have 20 per cent equity in the property and are due to refix. Now we have $100,000 in savings, a $200,000 gift from family. We will offset this amount. Every month $8,000 in salaries go into our account. Can we offset this amount as well? What are the options for monthly savings after refixing?

A: You want to start by understanding what fixed-rate term you will fix the majority of your debt on (in most cases we recommend either the six or 12-month rates as rates are expected to drop quickly and significantly across the next 12 months).

You then may want to leave some additional debt on either the revolving credit or offset facility that you are going to use to offset the $300,000 cash you will have from savings and the gift. If you find you have further funds available, depending on the bank you are with, you may also be able to pay an amount above the payment on the fixed-rate mortgage split without incurring a break fee.

Note, for this last part this differs from bank to bank, depending on their rules. Also note that while pretty much all banks offer revolving credit facilities for the $300,000, only three banks offer actual offset facilities.

Kris Pedersen

krispedersen.co.nz