Finance: Smart borrowers will take advantage

Whether your home loan is fixed or floating - and there's a lot of discussion around at the moment about which is best - there's no doubt you're probably paying one of the lowest interest rates you've ever encountered.

Floating rates are sitting around the mid 5 per cents and some fixed terms aren't much higher. For most homeowners, this means more money in their pockets each month.

Take advantage of this by using that extra cash to pay down your mortgage as quickly as you can. That means, when rates do eventually pick up again, you'll have less left to pay and the increase in the rate won't sting quite as hard!

It's particularly relevant for property investors. Those who may have got into negatively geared investments in the hope of short-term capital gains have a chance to turn that around by paying the mortgage down into positive gearing - where the rental returns more than cover the mortgage payments.

It's also a good time to check whether you've got your mortgage structured properly. If you're a businessperson who has peaks and troughs of cashflow - some months you might have $20,000 in your business account, for example - or even a salary earner who's paid a chunk of cash monthly, there are benefits to having a flexible mortgage.

How that works is that a portion of your mortgage is set up a bit like a big overdraft. You put your chunk of money in there when you get it, and it sits in the account, offsetting the interest on your mortgage. During this time, you can take advantage of the interest-free month on your credit card to leave the money in there for as long as possible.

Even if you end up eventually having to pull it all out to pay bills, that money will have made a big difference to the cost of servicing your home loan.

Most banks offer this facility - talk to your bank manager about whether it's the right way to go for you.

Several commentators have said money has never been this cheap before and likely won't be again. We aren't seeing the extremely low rates of Japan - where they are sitting on 0.1 per cent - or the US, UK or Europe, but our rates are low enough to make a substantial difference to the bank accounts of most New Zealanders. Use this opportunity to set yourself up for the future.