Mortgages: your questions answered by Mary Holm

Shall I go for a fixed or floating mortgage, and how long a term? Is it better to put extra money into my mortgage or my KiwiSaver fund? Can I use my KiwiSaver fund to buy a container house? Mary Holm answers listeners' questions about mortgages.Shall I go for a fixed or floating mortgage, and how long a term?Is it better to put extra money into my mortgage or my KiwiSaver fund?Can I use my KiwiSaver fund to buy a container house? Mary Holm answers listeners' questions about mortgagesAnne is in her mid-50s and recently bought her first home.It's been a daunting task, I don't know much about mortgages and I've been unable to find good explanations and advice by googling. I have a mortgage of $250,000 approved by the bank. I'm thinking a 15-year term might be best but am confused how much to fix how much to float. I earn $120,000 gross, have two dependent children. I'm not so certain I can pay off early although I may have some money coming from my parents' will. Do you have advice?Mary advises that a fifteen-year mortgage is a good idea for Anne."Then she's got a chance of paying it off by perhaps by the time she's 70. The shorter the term the better, because you'll pay a lot less interest in total over the life of then loan."But the shorter the term the more you have to pay each month, so you've got to make sure it is within your grasp to pay that amount."In terms of fixed versus floating, Mary thinks a bit of both is wise.Although at the moment fixed rates are low compared with floating rates that hasn't always been the case, she says."I was shocked at how much higher rates on floating are at the moment, they're quite a lot higher, 1.5 percentage points higher. It won't always be like that but if you look at a graph back ten years there are just as many periods when floating rates are lower than fixed. It just depends what the market thinks is going to happen to interest rates in the future. Don't just look at the current rates and say 'fixed is cheaper I'm going to go all fixed'."I would suggest to Anne she gets at least some of it floating because it is much more flexible and down the track floating rates could go below fixed they certainly will at some point." With fixed mortgages typically you can't pay much off until the end of the loan, Mary says, so if you come into some money you can't pay a chunk down. She suggests Anne considers fixing $200,000 and floating $50,000.In 2008, Martin took a $220,000 mortgage on a ten-year period for a refurbishment…Go to this episode on rnz.co.nz for more details