7 Strategies of Mortgage Mastery v1

7 STRATEGIES OF MORTGAGE MASTERY
How To Maximise Your Borrowing Potential During a Boom

& Protect Your Portfolio During a Downturn
©2015 Ammon Acarapi

CONTENTS
Strategy #1
Know what the bank wants . ....................................................................5
Strategy #2
Play around on your lender.......................................................................9
Strategy #3
Borrow intelligently .................................................................................12
Strategy #4
Be a structure specialist ..........................................................................15
Strategy #5
Average out your interest rates ................................................................18
Strategy #6
Plan to expand . ......................................................................................22
Strategy #7
Keep yourself covered .............................................................................25
7 S T R AT E G I E S O F M O R T G A G E M A S T E R Y 3
Don’t give up your coffee just yet...
Don’t panic. You don’t have to give up your daily coffee. This isn’t a book about budgeting or
personal finance. This is a book designed to help you master your mortgages. Over the years,
correctly structuring your mortgage and staying clear of the traps will help you save enough
money to buy plenty of coffee. Or a coffee shop. Or, possibly, a whole chain of coffee shops and
the land they’re sitting on.
I want to give you some strategies that mortgage brokers use to help their clients secure loans
from banks. By explaining these strategies, you will have a better idea how to:
a) get the bank to say ‘Yes’ to your loan application,
b) pay off your mortgage more quickly,
c) avoid some of the most common traps that can catch borrowers out, and,
d) build a successful property portfolio.
Armed with this knowledge, you’ll be able to help your mortgage broker get you the best pos-
sible terms, the loans you want and the structure that suits your personal profile. If you want
a book on budgeting, I don’t have any recommendations because I have no trouble sleeping.
Maybe try the library. But if you want to master your mortgages, read on.
Disclaimer
I am a professional mortgage broker and a Registered Financial Advisor. This book presents
some of my experiences as a broker, to help you further your understanding of the lending
process on property. I have changed the names of my clients to protect their identities, and in
some cases the locations of their properties or their professions.
This book contains generalised information only. In order to make informed decisions, you
need specific advice that is tailored to your personal circumstances from a Registered Financial
Advisor.
STRATEGY #1
KNOW WHAT THE BANK WANTS
The most successful way to consider your loan application is to look at it from the bank’s pers-
pective. You need to think like a bank. This is one of the areas where mortgage brokers are so
valuable - we spends hundreds of hours each year talking to the banks, and we know exactly
what they want to see on an application.
So, what is the bank thinking when it looks at your lending application? One of the most im-
portant things to remember is that each bank will look at your application slightly differently.
Every bank has a calculator spreadsheet, into which it plugs your application data, and the
spreadsheet spits out a magic number: how much you can borrow. But each bank’s calculator
is unique, and some are more complex than others, and each one will spit out a different magic
number. What does this mean for you? It means that if you get turned down by one bank, you
won’t necessarily get turned down by every bank.
If you have been turned down once, there are also several ways you can make your applica-
tion look more appealing to the next bank. Now obviously you can’t change the fundamentals
of your application - you can’t conveniently forget about one of your children, or one of your
properties. But I have five tricks up my sleeve that I can share with you* to make the same
numbers look more approvable:
1) If you’re a cheapskate, start bragging

When the bank looks at your cost of living, it comes up with this number in one of two ways:
1. It uses its standard ‘cost of living’ calculator, multiplied by the number of people in
your household and where you live, or,
2. It uses your own cost of living budget, which you can prove through your accounts.
Now, if you are a bit of frugal type, and your cost of living is likely to be lower than the bank’s
generalised average, you should make sure that your own, personal cost-of-living details are
included in your loan application.
On the other hand, if you prefer a more free-spending approach to life, you’re probably best to
stick with the bank’s own calculations.
2) Vehicles aren’t always an asset
You see your vehicles as an asset, right? Well they are... And they aren’t. Sometimes I see len-
ding applications where the borrower has proudly listed the vehicles like this:
a) Mum’s car, value $15,000
b) Dad’s car, value $45,000
c) Teenager’s car, value $6,000
d) American motorcycle, value $5,000
e) Japanese motorcycle, value $1,500
f) Vintage Rover 110, value $18,000
To the casual eye, this looks like a whopping $90,500 in horsepower to add to your net worth.
Fantastic! But I have two items of bad news. First, banks aren’t nearly as interested in your net
worth as you might imagine (more on that below). Second, banks can - and do - calculate each
vehicle as a drain on your cashflow to the tune of $400 per month. Instead of adding $90,500
to your net worth, these cars are featuring more prominently as a liability, to the tune of $2,400
a month on your potential servicing.
This veritable car yard could probably be reduced to one car: Mum’s. Dad’s car is owned by the
business and the costs come out of the company. The teenager’s car belongs to him and he pays
the bills. Delete these from the application. The Japanese motorcycle is ridden only in summer
and the American motorcycle about twice a year. The vintage car almost never leaves the ga-
rage. These circumstances need to be spelled out clearly on your application. Now, only $400 a
month is coming out of your cashflow on vehicles, leaving you a lot more to spend on servicing.
3) There’s a lot you don’t need to bother declaring

The bank is seriously keen on looking at two numbers:
1. The loan-to-value ratio of your property/properties, and,
2. Your debt-to-servicing ratio - how much of your income is spent servicing debt.
Forget about the stamp collection, the engagement ring, and the Mac - the bank doesn’t really
care about an extra $20,000 or even $50,000 in net worth.
4) Cancel some credit cards
If you’re a savvy spender, you may pay down your credit card in full each month. Give yourself a
pat on the bank. But don’t expect the bank to join in the praise. All the bank sees when it looks at
your credit cards is potential spending. I often see clients with a list of cards that looks like this:
a) Bank credit card with a limit of $5,000,
b) GE Finance card or Gem Visa with a limit of $2,500,
c) Farmers card with a limit of $1,000, and,
d) American Express with a limit of $6,000.
Even if every card has a balance of $0.00, on your loan application this counts as $14,500 of
debt, because in theory you could max out all your cards any day of the week. This non-existent
‘loan’ will require ‘servicing’ each month in the bank’s calculator. This will severely cut into
what you had earmarked for servicing a mortgage.
Cancel or reduce the limit on your cards and you could make a major difference to your
application:
a) Bank credit card with a limit of $5,000, reduced to $3,000,
b) GE Finance card or Gem Visa with a limit of $2,500, reduced to $1,000,
c) Farmers card with a limit of $1,000, cancelled, and
d) American Express with a limit of $6,000, cancelled.
Now the total ‘loan’ is just $4,000, freeing up a lot of income which no longer has to ‘service’
an imaginary debt.
5) Hello, housemate
Do you have empty rooms in your house? Take in a border and the bank will add up to $250
(depending on the bank) per week onto your income. The good news is that if you can find so-
meone willing to rent your room, they don’t need to be living there at the time of the application.
They can be about to move in, or on holiday, but provided they are willing to sign a statement
that they are paying/ or about to start paying the board, that is proof enough for the bank.
I’ve seen these five tips help out many clients over the years. Alan and Courtney are a good
example - they owned a house worth around $550,000 and one investment property (a two-
bedroom unit in Ellerslie) worth around $400,000 taking in $550 a week in rent. Their combi-
ned income was $110,000, and they were looking for preapproval of $400,000 to buy a second
unit in Epsom. They applied for the $400,000 preapproval with one bank, and were turned
down. The bank turned down the application, considering that their income was insufficient
to service the loan.
I helped them to apply to a bank I knew that had a lower sensitivity margin. I took one of the
cars out of the equation, by showing the bank that Courtney’s company was paying all her ex-
penses on that vehicle. They cancelled three store cards and one of their two personal credit
cards. Courtney got a second card for her bank credit card for Alan to use. That reduced their
potential maximum credit card limits from $18,500 to $8,000. They were able to get their loan
approved with the second bank, with no problems, and were able to buy their second unit in
Epsom - which has since increased in value by $50,000 in 14 months. A great result all round.
* I have other tricks up my sleeve that I can’t share with you. The main one is that I, as a
mortgage broker, have access to information that you, the borrower, do not. I know which
banks are likely to approve your loan, and which banks aren’t. I know how the lending
cycle varies so you can time your application effectively. I know who to talk to, and who
to avoid. Come and talk to me and I can help you out.
THE PROPERTY ADVANTAGE

Why invest in property? Three reasons:
1. Leverage. This is the biggest advantage of property: the bank will let you use its mo-
ney for almost all the cost of the property. That does not apply to any other type of
investment in the same way. It’s relatively easy to borrow money to buy a property,
but you don’t need to share the profits with the bank. You get to use the bank’s money
to create your wealth. You just can’t do that with shares.
2. Arbitrage opportunities. This is a economist’s way of saying that you can make the
most of different prices across the market. You can find a bargain, and pay below
value, because the market is far from perfect. Usually bargains are the result of one
of the three Ds: death, divorce or debt. None of that applies to shares or commodities
– try telling your broker you’re making an offer of $6.50 per share on those $7 shares.
You’d be lucky.
3. Control. You can directly control your investment if you are putting your money di-
rectly into buying your own residential rentals or commercial property. You can buy
below value, renovate, revalue and take your money out. You choose how your invest-
ment is managed and what will be spent on it.
Plus, buying property is less risky than running your own business, because start-ups have an
extremely high failure rate. And finally, if it all goes pear-shaped, you still have a visible, tangi-
ble asset. That can’t be said about shares or commodities in most cases.
STRATEGY #2
PLAY AROUND ON YOUR LENDER
The average consumer is a loyal soul who uses just one bank. That bank is the happy recipient
of all the customer’s banking.
Take Shaun, for instance. It’s 2008. He runs a catering company, and his business banking is
with A-Bank. His home loan is held by A-Bank and his investment properties are also with
A-Bank. He’s doing a development on the back half of the section where his commercial pre-
mises are based. A-Bank has set Shaun up with a revolving line of credit of $200,000. Shaun
relies on that to help with his business cashflow, using $30,000 to $40,000 each month to pay
up-front business expenses. A-Bank loves Shaun and treats him like a king. The catering com-
pany is busy, the development is going well, and his monogamous banking relationship is like
a happy marriage.
When things go bad…

As you can guess, dark clouds are on the horizon for loyal one-bank Shaun. It’s easy to borrow
when the market’s on the way up, but on the way down the banks are less aggressive, their
appetites to lend reduce, their risk tolerances drop, their service sensitivity margins increase,
and their policies on an acceptable number of total securities for one person change quickly.
Fast-forward to 2010, during the global financial crisis, A-Bank started getting nervous about
Shaun’s lending. It decided to cut his revolving line of credit to $5,000. Shaun can’t run his bu-
siness and he can’t pay for his development. He thought his banking marriage was ‘for better,
for worse; for richer, for poorer’. The bad news is that the bank isn’t very keen on ‘worse’ and
‘poorer’.
Unfortunately, that’s a true story. Shaun was forced to sell several rental properties (some for
less than was owed on them) and borrow at a high interest rate from a second-tier lender in
order to get through the rough patch. He was brought to the brink by A-Bank, and had nowhere
else to turn.
Why should you play around on your lender?
Hope for the best, but plan for the worst. This table summarises some of the worst-case-scena-
rio events where staying loyal to one bank can wreak havoc on your finances:
Scenario One bank More than one bank
Your lending application is You may be out of options; other Your options proliferate with
denied and the market is in a banks may not want to take a each bank you deal with; each
downturn chance on a new customer bank’s criteria is slightly different
You have a large revolving credit Your bank can arbitrarily reduce Your bank can reduce your re-
facility, but the bank decides it your revolving credit, leaving you volving credit, but you can apply
wants to reduce its exposure to in a cashflow crisis for more credit with your other
risk lenders
You sell a property at a time Your bank can decide that it You can work with your broker to
when the bank wants to lower wants the proceeds of the sale to ensure that the proceeds of a sale
your loan-to-value ratio (LVR) reduce your overall debt, taking go into an account where you get
all the cash to lower your LVR to decide how the cash is spent
Your property is damaged by Your bank can call in the mort- Your bank can call in the mort-
tenants and the insurance payout gage on that property, and if the gage, and may be able to go after
is disputed; the property remains property goes to a mortgagee the other one or two properties
vacant and you fail to pay the sale and there is still money out- held there; it has no power to
mortgage for three months standing, the bank can go after touch your business, your home
your house, your business and all or any other properties held at
your other properties different banks
I believe everyone should have a relationship with at least two banks. The more investment
properties you own, the more banks you need to be in bed with. My home is in trust; I have
two of my investment properties with one bank; two with another bank; and two with a third
bank; my business is with a fourth bank. As a general rule, I try to stay under a million dollars
in lending with any one bank. I should stress that this is what I do, and it suits my situation, but
you will need to tailor your lending to your own portfolio; you would be well advised to seek
advice from a broker who is a Registered Financial Adviser on this.
I don’t deny that this complex set-up involves some gnashing of teeth and wringing of hands
for my accountant, but I’ve seen too many new clients caught in the trap of thinking that their
loyalty to a bank will be rewarded with lenience and love when times are tough. Sadly, the op-
posite is more likely to happen. When the economy takes a downturn, banks aren’t interested
in loyalty, they’re interested only in numbers.
By having accounts and loans across a range of banks, you have many more options available
when problems strike. Kathryn and Aaron found this out in 2009 when they were halfway
through a subdivision development. They had a great strategy: they would subdivide the sec-
tion, build a house on the back, then sell the new build and use it to reduce the loan on the
front house. A-Bank was lending them the money, but luckily they also had accounts and a
relationship with B-Bank. When A-Bank decided that Kathryn and Aaron couldn’t have any
more money to keep funding their build, the couple showed A-Bank the new valuation on the
build, and explained that the bank had funded the project to 90%, so if the project collapsed it
was going to be as much A-Bank’s problem as theirs. A-Bank was not persuaded to cooperate.
B-Bank, on the other hand, looked at the strategy, the valuation and the couple’s record. They
had another rental property at B-Bank and had been reliably servicing the loan for many years.
The development fit B-Bank’s lending criteria and B-Bank refinanced the project, and gave
Kathryn and Aaron money to complete the build.
Being in bed with several banks also reduces your exposure to cross-collateralisation. The
banks will use each of your properties (starting with your home) to secure all your loans,
even if they are in separate legal entities such as trusts or companies rather than your own
name. Rather than each individual mortgage being secured by that specific property, your
whole portfolio is secured by your whole portfolio. This is not advantageous for you, because
if something goes wrong with one property, your entire portfolio is at stake as far as the bank
is concerned. The bank can also force you to use the proceeds of a sale of one property to pay
down debt against other properties, even if you have other plans for the money. By splitting
your properties across several banks, the whole kit and caboodle is never on the table when
one is sold or vacant.
By playing around on your lender and hopping into bed with two or three other banks, you
are positioning yourself to take advantage of all the possible lending options when the market
becomes volatile. It’s the strategic and sensible way to play the game when times are good,
because the good times don’t last forever. When the market is on the way down, you’ll have
flexibility among the banks, and what might have spelled ‘game over’ just means a change in
financing strategies.
CREDIT CARD OR INVESTMENT PROPERTY?

If you have high-interest debts, in most cases you should pay those off before investing in
property (talk to your own financial adviser about your own situation). You should pay off the
highest interest rate debt first, unless you have a few small debts you can knock on the head
quickly to help you start ticking off the list.
Paying 20% finance on your car and 24% on your credit card? Pay off the credit card first.
STUDENT LOAN OR INVESTMENT PROPERTY?

Again, it all depends on your circumstances. Banks don’t penalise you much for a student loan
(details in the next chapter), and if you’re still on a low enough interest rate, you may be better
off applying your excess income to property rather than student loan repayment. As always,
take advice.
KIWISAVER OR INVESTMENT PROPERTY?

Should you invest in Kiwisaver or property? I invest in both. That’s because Kiwisaver offers
a level of government contribution that makes its overall return much better than almost any
other investment. But I want property also; property lets me diversify and gives me the levera-
ging, arbitrage opportunities and control that I don’t get with Kiwisaver.
STRATEGY #3
BORROW INTELLIGENTLY
There are two important ways to borrow intelligently. They affect two separate groups of peo-
ple. So the first question is this: Are you an investor or a homebuyer?
Intelligent borrowing for homebuyers

If you’re a homebuyer, borrowing to buy your own house, intelligent borrowing means putting
your money into appreciating assets. Put it this way; if you want to buy a house, this is what
stupid borrowing looks like:
» » Using your credit card to go on an overseas holiday you can’t afford.
» » Financing consumer goods like home furnishings and electronics for entertainment.
» » Financing a car that is more expensive than you need. You may need a car to get to
work, making it a genuine necessity, but keep car finance to the bare minimum.
When it comes to your loan application to the bank, none of this looks good. These are depre-
ciating assets: they are all worth less than you owe on them from the moment you take them
out of the packaging (or in the case of the holiday, worth nothing at all from the moment you
arrive).
Paying for these depreciating assets has a very adverse effect on your servicing – each month
you are paying $1,000 on your new Holden Commodore, $300 on your Gem Visa for that new
iPad and the sofas, and $200 in interest on your MasterCard for that trip to Bali. The bank takes
one look at those kinds of outgoings, and your credit card’s limit, and factors them all into your
servicing ability. The amount you can borrow suddenly begins to decrease dramatically.
It’s not always easy for the average consumer to understand this. I had one client tell me that
the bank should be impressed with his ability to save up $80,000 and then buy a $120,000 car.
I tried to explain that the bank would have been more impressed if he’d spent $40,000 on a car
and kept the other $40,000 to help with a deposit. If you have consumer debt on depreciating
items, work hard to reduce it as much as you can before you apply for a home loan.
Assets and investments

Smart borrowing means buying things that will increase in value. By this I don’t mean artwork,
antiques, rare coins or beanie babies. I mean assets like a house or an education, or invest-
ments like property, a business, or shares.
Why isn’t a house classed as an investment? You don’t earn an income on it, so while it’s an
asset, it isn’t an investment. In addition, the mortgage on your home isn’t tax deductible.
Why is an education considered an asset? Tertiary education gives you greater earning power
in the future, and over your lifetime this can add up to millions of dollars. Banks know this, and
they treat student loans differently to other types of debt. The cost of servicing the student
loan will reduce your servicing, but the total balance of the loan isn’t considered a problem. A
student loan of $70,000 or $80,000 won’t have a great deal of impact on your lending ability,
and small changes in the balance (SHEET) make no difference at all.
In order to maximise your borrowing power, take out a loan to educate yourself or to buy a
house or investment. Avoid consumer finance for money-draining items like toys and holidays.
Try to save up for those items and buy them only when you can afford them.
Intelligent borrowing for investors

Investors tend to be in a different category when it comes to both lending and spending. In my
experience, property investors have a diligence that sets them aside from the average consu-
mer-orientated New Zealander. (And if you’ve taken the time to download and read this book,
you’re probably not the average New Zealander when it comes to money – and that’s a good
thing.)
Most investors have reached a strong financial position by:
» » Setting clear financial goals
» » Living within their means
» » Buying a home as soon as they can afford to do so
» » Using the equity on that home to buy a rental property
» » Waiting until the market rises to take the equity out of their rental and buy another
rental property
» » Buying more rental properties until they reach their borrowing maximums.
That’s not to say they don’t enjoy a quality lifestyle. Many of my clients will reward themselves
with a moderate bit of splurging when they reach their goals – like a family holiday or a new
(but usually second-hand) car. So, assuming that investors understand the value of avoiding
consumer finance traps, what does intelligent borrowing look like for investors?
Creating opportunities for tax deductible debts

Many of my clients are investors by default. In most cases, this is because they have bought a
new house to live in, and they either a) can’t sell the old house, or b) their broker shows them
they can afford to keep both houses.
Because they’ve fallen into residential property investment by default, these two properties
will both be owned in their own name. This set-up is a huge missed opportunity, because ha-
ving your properties owned by the right entities can have massive advantages, as my client
Stephanie found out.
Stephanie lived in a small house in Northcote, on Auckland’s North Shore. She decided to move
to a slightly larger house, and her real estate agent highlighted that the rent on her old proper-
ty may cover the $160,000 mortgage, so she could keep it as a rental. She had the old property
valued at just under $500,000, and paid just under $600,000 for the new property.
She came to me for help with the lending, and I was able to refer her to an accountant. He
helped to show her how that selling the old house into a look-through company, known as an
LTC, would provide her with the chance of off-setting some of her debt against her income. An
LTC is a company where the income is taxed only after deducting the expenses of the company,
making it ideal for situations where a company is running at a loss. Stephanie’s old house, now
to be rented out, was sold into the LTC for $500,000, with a mortgage of $280,000 in total.
This number included both the original $160,000 mortgage and a deposit of $120,000 for the
new house which came from the equity in the old house. She put her new house into a family
trust. Despite being secured by the new house in the family trust, the LTC debt was still owed
to Stephanie personally.
This means that the LTC had a debt of $280,000, which it owed to Stephanie personally. So
she could claim interest on the full $500,000, which is around $30,000 a year. This reduced
Stephanie’s taxable income from $100,000 to just $70,000 – before other depreciation was
taken into account.
Not every investor will benefit from setting up an LTC and a trust. There are myriad of ways to
allow your rental property outgoings to be set against your income, but it is possible to do this
for almost all investors. Any investor with more than one property can be taking advantage
of this opportunity to make their debt tax-deductible. All you need is a really good mortgage
broker and accountant who both know property investment well.
SECOND-TIER LENDERS
In general terms, lenders that aren’t backed by the government aren’t subject to the same
Reserve Bank restrictions. If you are turned down by all the banks, it may be possible to se-
cure funding – at a higher cost – from second-tier institution such as a non-trading bank or
Australian-based lender.
Is this a good idea? Provided you can service your debt and the lender is secure, second-tier
lenders can help you get a financial leg-up when you most need it. But do your due diligence
and make sure the lender isn’t going to go belly-up. Even big lenders can hit rough waters, like
lending franchise Wizard, which went out of business in 2008 despite being owned by GE.
(The company cited the Blue Chip scandal as a factor in its demise.) Luckily, all the loans were
picked up by GE, but it was a stressful time in the middle of the financial crisis.
Just like any other aspect of finance, taking a risk can pay off – but make sure you know the
risks so you can make an informed decision.
STRATEGY #4
BE A STRUCTURE SPECIALIST
There are three important questions to ask yourself when it comes to structuring your
mortgage:
1. Will your loan be a principal-and-interest loan or an interest-only loan?
2. Should you have a revolving credit loan?
3. How should you fix or float your interest rates across your lending?
This chapter answers the first two questions, and the next chapter deals with interest rates.
Should you be paying off the principle on your loan?

When it comes to home loans, there’s principal-and-interest borrowing and there’s interest-
only borrowing. The bank likes principal-and-interest borrowing, because it reduces your debt
more quickly. Investors like interest-only borrowing because it frees up more cash to buy more
property.
So what type of loan should you choose? This is usually a pretty easy question to answer – you
should definitely be paying off principle on your own home, but not on your rental properties.
This is tied in with the principles of intelligent lending: your home loan is not tax deductible,
so you should be using the income from your other investments to pay off your home loan first.
And let’s face facts, it’s unlikely that the bank will give you an interest-only loan for your own
house; if you can’t service an principal-and-interest loan they bank probably won’t lend you
the money. Once your home loan is paid off, if you are the more conservative sort and you
prefer to reduce your debt, you would then start to pay off your rental properties one by one.
Those with a more aggressive approach to portfolio-building will probably keep everything on
interest-only and use the additional funds to keep on buying.
As you hold onto your rental properties, you will eventually reach the Holy Grail – a point
where the rent is high enough to service a principal-and-interest loan. This is fantastic, be-
cause then you’re creating equity two ways, simultaneously reducing debt as the value of the
property increases.
I’ve been lucky enough to be in this position with a property I bought in Massey, Auckland, in
2004. I paid $192,000 for it using a 100% loan, and spent an additional $120,000 to build a
minor dwelling on the section. The total mortgage was then $312,000 and the two dwellings
rented for $360 and $320 a week. At the time I had to top up the mortgage to the tune of a
couple of hundred dollars a month. In about 2009 the bank asked me if I wanted to switch to a
principal-and-interest loan, and as I was renting at the time I said yes. Now, ten years later, the
rents are $420 and $400 a week, which comfortably services the interest and some principal
repayments on the mortgage at a 4.99% interest rate. The mortgage is down to $250,000 and
the property has recently been valued at $798,000.
How long can I use an interest-only structure?
Interest-only loans are – like all lending – easier to come by in the boom times. Banks will usu-
ally grant you an interest-only period of two to five years, then you can reapply. If the bank turns
you down, you can refinance to another bank which will approve the interest-only borrowing.
When times get tough, although it seems counterproductive, banks won’t give you interest-
only debt. They want to see debt reduction. This is another important reason to play around
on your lender. If you are in bed with more than one bank, it makes it easier to maintain an
interest-only structure on your rental properties. When one bank turns you down, you can
apply to your second or third bank.
Should I set up a revolving credit account?

Revolving credit can be a powerful tool, provided you can exercise restraint. A revolving credit
account lets you have access to funding that can let you buy properties, fund a shortfall or even
hold onto your properties in a downturn. It can also help you pay off your mortgage faster –
every dollar that sits in the account helps to reduce the interest you pay on your loan.
However, revolving credit only works for the 20% of the population who won’t use the credit
to buy a car or go on holiday. That’s a serious warning – I’ve seen clients go shopping on their
revolving credit and cause themselves serious problems. The bank won’t extend your credit
indefinitely, and it may even reduce your credit when times get tight.
On the flipside, I’ve also seen revolving credit used to hold onto a property portfolio when
times were tight. A client of mine, Max, had a nine-property portfolio that he had been buil-
ding up for several years when the global financial crisis hit in 2007. Interest rates shot up to
double digits, sending his portfolio from cashflow neutral to cashflow negative to the tune of
$50,000 a year. He could have sold one or more of his properties to solve this problem, but Max
knew that the interest rates were a temporary blip.
Using his revolving credit, he funded the lending shortfall right through the downturn and
was back to neutral once the interest rates dropped again. Then the market boomed, his rents
went up, and he was rapidly transformed from having a $50,000 shortfall to having millions in
equity and positive cashflow of close to $30,000 annually.
That takes balls. For most of us, a revolving credit account is a way to access funds you might
need for a brief vacancy or to borrow in an emergency at residential interest rates rather than
crippling credit card rates.
The moral of this story is that you should maximise your revolving credit when the banks offer
it to you. When the market is booming, apply for and accept the most you can – it’s possible
that the bank will reduce this amount in a recession, but you’re much more likely to be able to
hold onto an existing credit account than open a new one when times are tight. You don’t have
to spend it and you can use it purely to reduce debt.
OFFSET LOANS
An offset loan is a way to pay down a mortgage more quickly. You don’t have access to funds,
but your savings are offset against your lending to reduce the amount of interest you pay. I
have been seeing more and more investors making use of offset loans, and they tend to be very
savvy customers. If you have money saved for a deposit or a chunk of rental income, you can
set these up to either pay your home loan more aggressively.
WHAT DO MORTGAGE REDUCTION COMPANIES DO?

My father in law was one of the people who first brought the idea of paying for mortgage
reduction structuring to New Zealand. These companies often knock on your door, and they
offer ways for you to restructure your mortgage, reallocate your budget and pay off your debt
more quickly.
Some of my clients have asked me why these companies charge so much and keep all their
information confidential – do they have some kind of secret formula? The truth is that if you’re
reading a book like this, you are not the target market for one of these businesses. Those busi-
nesses are not doing anything you can’t do yourself with the help of a mortgage broker and a
financial adviser, or plenty of DIY research.
But do understand that these companies are not a scam; they’re a type of financial guidance for
people who would otherwise not know how to apply a revolving credit loan, or how to effecti-
vely budget to create higher payments. For their target market, it can be a good investment to
spend $5,000 in order to save tens of thousands of dollars in the long run.
STRATEGY #5
AVERAGE OUT YOUR INTEREST RATES
Fix or float? It’s a simple little question with enormous ramifications. On a $500,000 mortgage,
each 1% interest rate increase means your ability to borrow is reduced by $50,000. And it’s
looking likely that mortgage rates will rise by one or two percent over the next few years, con-
sidering New Zealand’s historic average interest rate is around 7.5%.
If you made the worst possible decision with your interest rate decisions at every state of your
mortgage, you could pay tens – or even hundreds – of thousands of dollars in unnecessary
interest. It’s a sobering thought. Why doesn’t that happen to most people? Because they make
some decisions that are brilliantly well-timed, some where the timing is terrible, and the ma-
jority are just average.
It doesn’t need to be that vague. You can actually turn this pattern to your advantage with in-
terest rate averaging. Interest rate averaging is the number one method used by multinational
companies to manage their debt, although they call it ‘weighted average cost of capital’. Just
because you’re not a major international business doesn’t mean you can’t get some of the same
advantages when you manage your debt.
To put it in a nutshell:
» » Don’t fix all your debt.
» » Don’t float all your debt.
» » Split your debts up so you aren’t ever hit hard by interest rate changes.
What interest rate averaging will do

Averaging out your interest rates protects you from jumps in rates. It breaks your debt down
into more manageable chunks, and you only need to deal with one or two chunks in an ave-
rage year. With New Zealand’s fast-changing economy and volatile interest rates, this system
prevents your properties from being at the mercy of the Reserve Bank’s OCR announcements.
If you leave yourself at the brink of your servicing maximum, a sudden increase in interest
rates can force you into a fire sale – the last thing any investor or homeowner wants to do. A
higher cost of debt can create uncertainty and panic, not just for you, but for the whole market.
Plus, you don’t want to fix your loans for two years at 9%, as so many people did in 2008, only
to see rates fall to 5%. Even in 2014, I meet the odd person coming off a high five-year fixed
rate from 2009; that person has probably paid at least $50,000 in additional interest on that
loan. You really don’t want to be that guy.
It is possible to pay a break fee to get out of your fixed term, and in competitive conditions
banks will pay this for you (I’ve seen banks pay up to $20,000 in bank fees to secure a new
loan). But avoiding this problem is much better than having to negotiate your way out of it.
Happily, interest rate averaging removes a great deal of that uncertainty. It gives you a long-
term outlook for your lending which reflects your long-term investment in property. I still
meet people who don’t know that they can split their loan even once, let alone six times.
Theoretically, you could split your mortgage into an almost unlimited number of chunks, but I
recommend five as a maximum.
Here’s how to do it:
1. Your portfolio: One big house

Treat all your properties as if they are one big house. Let’s say you have five properties:
» » Your own house, worth $850,000 and with a $500,000 mortgage,
» » A unit in Epsom, worth $450,000 and with a $400,000 mortgage,
» » A unit in Glenfield, worth $360,000 and with a $220,000 mortgage,
» » A house in Otahuhu, worth $520,000 and with a $130,000 mortgage, and,
» » Another house in Otahuhu, worth $480,000 and with a $150,000 mortgage.
Instead of trying to split these up individually and work out how to average the interest rates,
just put it all together. Your portfolio is:
» » Property worth $2,660,000, with a $1,400,000 mortgage
2. Split it five ways

In order to average out your interest rates, you want to have a split that looks something like
this:
»» 20% of your debt fixed for one year.
»» 20% of your debt fixed for two years.
»» 20% of your debt fixed for three years.
»» 20% of your debt fixed for five years.
»» 20% of your debt floating.
This means that around $280,000 in debt needs to be allocated to each category. Rather than
splitting each loan five ways, you can make it simpler. You can split it like this:
»» Your own house: $500,000 mortgage, split into two chunks, one of $250,000, floating
so you can pay in any additional income to reduce the debt, and one of $250,000 fixed
for five years.
»» Unit in Epsom: $400,000 mortgage, split into two chunks, one of $300,000 fixed for
three years, and one of $100,000 fixed for two years.
»» Unit in Glenfield: $220,000 mortgage, split into two chunks, one of $110,000 fixed for
two years and one of $110,000 fixed for one year.
»» House in Otahuhu: $130,000 mortgage, all fixed for two years.
»» House in Otahuhu: $150,000 mortgage, all fixed for one year.
Your totals are:
»» $250,000 floating.
»» $250,000 fixed for five years.
»» $300,000 fixed for three years.
»» $310,000 fixed for two years.
»» $260,000 fixed for one year.
3. Make a decision on each chunk when the fixed term expires

Each year, your one-year fixed amount of money will need to be refixed, or you can decide to
float it for a while. In most years there will also be one or two more chunks that need to be
refixed. But interest rate averaging means you only need to decide what to do with an average
of $280,000 in debt at any one point.
4. Budget for the higher fees

Interest rate averaging does multiply your paperwork, and there is often a fee for fixing each
time. (A good mortgage broker will ensure you never pay any re-fixing fees). As a result, your
bank fees will be higher using this system. However, they will be easily offset by the savings
that result from eliminating the effects of rising interest rates on your servicing.
How much money can this save you?

It’s impossible to predict exactly how much you can save using interest rate averaging. But
here’s an example on that total debt of $1,400,000 if the interest rate increases by 2%.
January: Annual interest rate charges on total loan floating at 6.75%: $94,500
December: Annual interest rate charges on total loan floating at 8.75%: $122,500
Increase of $28,000 in one year.
January: Annual interest rate charges on total loan split five ways with a floating rate of 6.75%
$250000 Floating 6.75% $16875
$250000 Fixed for five years 6.99% $17475
$300000 Fixed for three years 5.99% $17970
$310000 Fixed for two years 6.5% $20150
$260000 Fixed for one year 5.9% $15340
$1400000 Total $87810
December: Annual interest rate charges on total loan split five ways with a floating rate of
8.75%
$250000 Floating 8.75% $21875
$250000 Fixed for five years 6.99% $17475
$300000 Fixed for three years 5.99% $17970
$310000 Fixed for two years 6.5% $20150
$260000 Fixed for one year 5.9% $15340
$1400000 Total $92810
Increase of $5,000 in one year.
Using interest rate averaging saves you money across the term of your loans, reduces your
uncertainty and makes your life easier. You don’t even need to do much of the paperwork – just
talk to your broker and we can make it as simple as possible.
STRATEGY #6
PLAN TO EXPAND
If you’re serious about investing in property, you need to think ahead when it comes to buil-
ding your portfolio. Many of my clients have bought properties for reasons that don’t seem to
have much to do with their own goals. Reasons like:
» » It was a good deal.
» » Someone else I know bought one and did really well.
» » It was the only property I could afford at the time.
These aren’t sterling reasons to buy – you may do perfectly well with a property bought for
one of these reasons, but you’re much better off with a bit of a plan. I’m not saying you need to
create a mood board of aspirational magazine clippings. This is the kind of plan that actually
helps you to make excellent decisions right now.
You need to come up with a plan for your retirement income. Try this one from Sorted to get you
started, or just grab a spreadsheet and get started. You might decide you want a net worth of $1.5
million at retirement and a monthly income of $5,000. To do that, you might decide you need
to own six properties. You plan to sell three properties and put the cash in the bank, and keep
the other three. Your income will be a combination of rental income and interest on your cash.
The three properties you retain will still have mortgages, but will be cashflow positive. Working
backwards, you need to think about how best to buy six properties that will fulfil your criteria.
Everyone has a different combination of circumstances, including;
» » Your risk profile – how conservative or risk-taking you want to be with your money.
» » Your age – the further you are from retirement, the more time you have to make
changes and take risks.
» » Your income – high earners have better cashflow; more disposable income to put
aside to top up a mortgage on a cashflow negative property.
» » Your equity – if you already own a home and have substantial equity, you may have
strong borrowing power, but low cashflow; you may not have the extra income to
service a negatively geared property.
» » Your spare time – how much free time do you have to do your own renovations or
manage your own properties? A DIY approach can reduce your costs on your invest-
ment properties.
Then there are the circumstances that affect us all simultaneously: where are we in the pro-
perty cycle? Your buying strategy will be different in a boom phase than in a recession. Just as
importantly, the banking and lending environment will also vary enormously depending on
the current market conditions.
If all this sounds a bit boring, I’m going to cut to the chase. You need to balance your equity
with your cashflow, and that will help you to keep borrowing until you reach your goals. If you
tilt your portfolio too heavily in one direction, you soon won’t be able to borrow any more and
you’ll be hamstrung by the banks before you have built the portfolio you want.
First, ask yourself which category you fall into:
1. Low cashflow, low equity. Not ideal. You need to work on increasing your income,
reducing your outgoings, and generally finding a way to create a bit of surplus cash
each month so you can get into a position to fall into one of the next three categories.
Or you could consider doing Joint Ventures with family and friends, where they con-
tribute the money and you - the time and effort to find a property to purchase.
2. High cashflow, high equity. Well done, you should be in a position to build any portfo-
lio you fancy – let’s go shopping.
3. High cashflow, low equity. You have a high income but don’t have a lot of equity built
up. Using your uncommitted income, you can buy a few cashflow negative properties
which will rapidly increase in value. Look for opportunities to renovate and revalue,
in the better parts of your city. This will help you to generate potentially massive
equity in just a few years. When you run out of uncommitted income, you can then
follow the strategy for people who are:
4. Low cashflow, high equity. You have a big chunk of equity but low cashflow. You need
to buy cashflow positive properties so you can keep buying and servicing your debt.
It’s not always easy to find positive cashflow, so look for strategies like building a
minor dwelling or converting the layout to add another bedroom. You need to buy
the perfect property…
The perfect property

Remember that real wealth comes from capital growth, not rental income. You need rental
income to help you service your debt, but where you make your real money is through gains
in value.
The perfect property is one that lets you create a ‘no money down’ deal. It works like this:
1. Buy a house and renovate it or create a minor dwelling, or in some other way drama-
tically increase its value and market rent level.
2. Get a new valuation and borrow against it to get your initial deposit back.
3. Rent the property for a sum that will pay the mortgage without you needing to top
it up.
I’m not saying it’s easy, but it is possible. To find a property like this you need to be determined
and active in the market, as I described earlier when I was explaining the advantages of inves-
ting in property. This is the great benefit of the huge leverage that the bank will allow you when
it comes to property. You have used your money to acquire the house, you have got the money
back from the bank, your tenant is paying the mortgage and any gains in value you don’t have
to share with the bank.
Perfect.
Lending on larger portfolios

There are three levels of banking into which you and your portfolio can fall:
1. Retail banking.
2. Business banking.
3. Commercial banking.
Retail banking
One to five tenancies. Walk into any branch, any day of the week, talk to anyone (firstly your
broker) – everyday consumer banking.
Business banking
Five to ten tenancies. There’s a misconception that business banking is scary and involves jum-
ping though a lot of hoops. But it can actually be an advantage for investors because you get to
deal with a more highly-skilled and specialised banker. Because you’re dealing with someone
who understands the tax implications and structure of what you’re doing, your buying poten-
tial can actually be slightly higher than it would in retail banking. Ideal.
Commercial banking
Ten or more tenancies. This is where your lending gets a bit more difficult and pricier. There
are some investors who manage to finagle priority interest rates as a result of putting all their
lending with one commercial banking lender. However, personally I wouldn’t want to end up in
commercial banking. I try to maintain a strong relationship with several lenders so I don’t end
up in commercial banking anywhere.
STRATEGY #7
KEEP YOURSELF COVERED
Insurance is like a lifejacket – you barely think about it, it’s kind of a hassle, it’s a bit boring and
you wouldn’t want to waste too much money on it. Then your ship sinks in the middle of the
ocean. Suddenly your lifejacket is the most important thing in your world. It’s more important
than your job, or your ship, or your possessions; it’s instantly more important than almost all
of the things you spend your time worrying about.
So how’s your lifejacket looking? Neglected? Patchy? Lost its whistle? Will it keep you afloat?
I know you don’t want to read a long chapter about insurance, so I’m keeping it simple. First,
insurance is on a continuum. At one end is your ‘no lifejacket approach’: pay no premiums,
insure yourself, take on 100% of the risk. At the other end is the ‘entire spare ship up your
sleeve’ approach, which is about as expensive as it sounds. Extremely high premiums, but you
take on no risk whatsoever; all the risk sits with your insurers. Most of us sit somewhere in the
middle, and you need to sit down with your insurance broker and come up with a plan for your
personal situation. Here are a few tips to help you prioritise your insurance.
1. Insure yourself
What will happen if you die? And, more likely, what will happen if you get cancer or heart dise-
ase? Or have a serious injury and can no longer work? I’ve seen clients who think that a rental
property will work as ‘insurance’ – they can sell it if there’s some kind of emergency. But do you
really want to sell your properties? What if the emergency happens in the middle of a recession?
2. Your family
Think about some of these questions: What if you get so sick someone in your family needs
to quit work to take care of you? What if you are so badly injured that someone in your family
needs to leave work to take care of you? I’ve seen marriages split up after the stressful financial
repercussions of a car accident that led to a paraplegic husband – it doesn’t have to be that way
if you have the right insurance. With a lump sum payment you can concentrate on recovery.
3. Insure your income

You can’t do much to help your family out if you have lost your income. Plus, when the bank
finds out you’ve lost your income, it could call in your loans – adding flame to the fire.
Ring-fencing your income and finding a way to protect it means you can still pay the mortga-
ges, the school fees and the grocery bills; plus you don’t have to sell your rentals. This is espe-
cially important if you own a small business which relies on your efforts to keep the money
coming in – you need that income to be protected in the event of a traumatic illness or injury.
Remember, if you are a DIY property manager, that work will not be covered unless you have
set up a business that pays you to do that work, and have insured that business income.
4. Insure your properties
You cannot rely on the default sum insured for your property. I have a client whose new luxury
home in Ponsonby had a default ‘sum insured’ value of $485,000 – that’s what he would get
to rebuild the house if it burned to the ground. He tried the online calculators, which came up
with sums of between $800,000 and $900,000. Finding the gap pretty alarming, he called a
professional quantity surveyor who prices up rebuild costs. The QS asked him if he wanted the
property to be rebuilt to the same standard (answer: “Yes of course I do, otherwise I wouldn’t
have built the house to this standard.”) The QS carefully looked at the whole building and pri-
ced it at $1.25 million to rebuild. That’s $715,000 he would have to find if the house had be
destroyed under the default sum insured.
Now your rental property probably isn’t going to cost over a million dollars to rebuild. But if
your sum insured is only a third of the real cost of a rebuild, you’ll be left seriously shortchan-
ged. And the bank will still want its mortgage payments on your charred shell of a rental.
Don’t let bad luck compound

There are always unexpected problems in life, and bad news. Why compound the bad news
by being thrown into financial strife and facing property fire sales or even bankruptcy? I have
plenty of horror stories, but I’m going to focus on two positive ones.
One of my friends, Sam, who is a successful investor, always thoroughly ensures his rentals.
When one of them burned to a cinder (nobody was hurt) he was actually left better off than
before. The house was rebuilt, but new and improved. Because the building code was higher
than when the house was built, he was left with a brand-new, higher-quality rental that had
increased value and commanded more rent. Although it took a year to build the new house, the
bank paid the full rent for a the entire period, so Sam had no vacancies or property management
fees to worry about, and the world’s easiest invisible tenants.
Now, there is no upside to being diagnosed with cancer. But one of my clients, Anita, did avoid a
serious downside. When her breast cancer was diagnosed, Anita received a lump sum of $250,000
under her trauma cover policy, plus she had comprehensive private health insurance to cover
the costs of treatment. That health cover meant she was able to use the lump sum to pay off the
$190,000 mortgage remaining on her highest-earning rental property (which was worth about
$580,000 and had a rent of around $500 a week). Anita now has a lovely positively-geared proper-
ty with a healthy net income to help her throughout her retirement, plus a spare $60,000 buffer.
Some last words of advice

Use a reputable independent insurance broker to help you tailor your insurances, not just sig-
ning up for the bank’s one-size-fits all standard packages. Bank insurance is the worst. Good
luck getting a pay-out from your bank and having to deal with all the claim details when you’re
already stressed out from your emergency situation.
And remember, the devil’s in the details when it comes to policies. Some offer free cover for
children, or a ‘premium payment holiday’ of up to six months, or health coverage for a full 43
types of health condition. Others are surprisingly limited, covering only nine conditions, for
instance, and excluding some of the most common types of cancer.
Get the right insurance and review it every year – with a top-quality lifejacket, your emergency
doesn’t have to turn into a tragedy.
DON’T GET SCAMMED
You would be surprised how many smart people are caught out by property scams – even tho-
se that can, in hindsight, seem obvious. People tend to be embarrassed and keep quiet, but I
do see the evidence in their financial information from time to time. Some of the biggest scams
have included:
Get independent advice

New Zealand’s most notorious property scam, Blue Chip investors were talked into putting de-
posits down on yet-to-be-built Auckland apartments with inflated values. The inflated values
looked real, but the valuers were allegedly being paid by Blue Chip to put favourable prices on
the apartments. There were plenty of other problems with this scam, and ultimately investors
were left with apartments that were worth only a fraction of what they had paid for them.
One lesson here: get independent advice on your financial decisions. Choose your own experts,
don’t rely on those provided by the people who are trying to talk you into a sale. For that same
reason, don’t buy properties that are marketed at property seminars. Listen to the seminar, but
do your own house-hunting.
Check all the contracts

You might be surprised by how often someone sells a property that isn’t theirs in the first pla-
ce. This has happened many times in New Zealand recently, and it’s a very easy scam to fall for,
because when you’re looking for a bargain you tend not to ask too many questions.
Remember to get your lawyer to check all the paperwork on your sale before you hand over
your deposit.
Do your due diligence

There are often ‘fantastic real estate bargains’ to be had in other countries. I’ve seen kiwis fall
for these in the US, where they pay just $50,000 for a property - which is surrounded by aban-
doned foreclosed houses and is really worth around $10,000. Another out-of-towner scam on
a tropical island was astounding in its audacity: the scammers wined and dined investors then
flew them by helicopter to see beautiful waterfront sections. Once purchased, investors were
astounded to find the land was only above water when the tide was out.
Do your due diligence and don’t buy in an area you don’t know unless you’ve done plenty of
research and talked to (once again) independent local experts.
Here’s How to Claim Your Free Comparative

Market Analysis – Valued at $50
THANKS FOR TAKING YOUR TIME TO READ MY EBOOK
“7 STRATEGIES OF MORTGAGE MASTERY”
As you know by now I love helping people unlock the

financial potential they didn’t even know they had
access too.
I really believe knowledge is power especially when

dealing with banks and financial lenders.
I would love to help you as well.
You have started the journey by reading my ebook and

now I’d like to offer you a free “Comparative Market
Ammon Acarapi
Analysis” on any property of your choice.
Your free “Comparative Market Analysis” includes the following information.
1. A value range of a property based on recent

sales and houses on the market of comparable
properties in the same location. Which
useful information for both house sellers and
purchasers.
2. The same raw data that valuers and real estate
agents use to give value assessments of your
property.
3. It let’s you know how much the previous owner
paid for the property and when they purchased
it which can assist in judging their motivation.
4. Gives historical and current property data i.e.
Median Sales Price, Rent and the number of sales
5. Demographic information for the area i.e. age,
occupation type and income
To claim your free “Comparative Market Analysis” valued at $50 email me at

ammon@supercitymortgages.co.nz or call me on 021 304 506
Talk soon,
Ammon Acarapi

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7 STRATEGIES OF MORTGAGE MASTERY

How To Maximise Your Borrowing Potential During a Boom

©2015 Ammon Acarapi

a) get the bank to say ‘Yes’ to your loan application,

b) pay off your mortgage more quickly,

d) build a successful property portfolio.

©2015 Ammon Acarapi

1) If you’re a cheapskate, start bragging

a) Mum’s car, value $15,000

b) Dad’s car, value $45,000

c) Teenager’s car, value $6,000

d) American motorcycle, value $5,000

e) Japanese motorcycle, value $1,500

f) Vintage Rover 110, value $18,000

3) There’s a lot you don’t need to bother declaring

1. The loan-to-value ratio of your property/properties, and,

a) Bank credit card with a limit of $5,000,

b) GE Finance card or Gem Visa with a limit of $2,500,

c) Farmers card with a limit of $1,000, and,

d) American Express with a limit of $6,000.

a) Bank credit card with a limit of $5,000, reduced to $3,000,

b) GE Finance card or Gem Visa with a limit of $2,500, reduced to $1,000,

c) Farmers card with a limit of $1,000, cancelled, and

d) American Express with a limit of $6,000, cancelled.

THE PROPERTY ADVANTAGE

When things go bad…

Scenario One bank More than one bank

CREDIT CARD OR INVESTMENT PROPERTY?

STUDENT LOAN OR INVESTMENT PROPERTY?

KIWISAVER OR INVESTMENT PROPERTY?

Intelligent borrowing for homebuyers

» » Using your credit card to go on an overseas holiday you can’t afford.

Assets and investments

Intelligent borrowing for investors

Most investors have reached a strong financial position by:

» » Setting clear financial goals

» » Living within their means

» » Buying a home as soon as they can afford to do so

» » Using the equity on that home to buy a rental property

Creating opportunities for tax deductible debts

1. Will your loan be a principal-and-interest loan or an interest-only loan?

2. Should you have a revolving credit loan?

Should you be paying off the principle on your loan?

Should I set up a revolving credit account?

WHAT DO MORTGAGE REDUCTION COMPANIES DO?

» » Don’t fix all your debt.

» » Don’t float all your debt.

What interest rate averaging will do

Here’s how to do it:

1. Your portfolio: One big house

» » Your own house, worth $850,000 and with a $500,000 mortgage,

» » A unit in Epsom, worth $450,000 and with a $400,000 mortgage,

» » A unit in Glenfield, worth $360,000 and with a $220,000 mortgage,

» » A house in Otahuhu, worth $520,000 and with a $130,000 mortgage, and,

» » Another house in Otahuhu, worth $480,000 and with a $150,000 mortgage.

» » Property worth $2,660,000, with a $1,400,000 mortgage

2. Split it five ways

»» 20% of your debt fixed for one year.

»» 20% of your debt fixed for two years.

»» 20% of your debt fixed for three years.

»» 20% of your debt fixed for five years.

»» 20% of your debt floating.

»» House in Otahuhu: $130,000 mortgage, all fixed for two years.