After some advice

[Leon M]

Hi All,

Well, I am hoping to sound you out and get some feedback if anyone has a couple of spare minutes. If you do, I really appreciate you taking the time to stop in!

Well, to give you some background, we are a young couple form Auckland, New Zealand. I am 24 and she is 21 - we have been saving for a house for a while now. I am on a 65k + 5k bonus package and she is on 45k. At the moment, we have no expenses and both live off about $100 a week (we are skimping). In the bank we have $180,000 (have had some family assistance) and are looking at making the plunge into the housing market. We are looking to purchase a house in the $400,000k range with interest around the 9% mark.

Now, this is where it starts getting complicated - I am really confused about what option to take. These are what I was thinking:

1) Buy house - around 400k mark, on a 5 year term. Payments are fairly high, but are managable. We would buy house, live at home for another 6 months and rent it out (adjust to expenses) before moving out.
Advantages: Short term mortgages
Disadvantages: Limited proerties avail for the $400k mark

2) Buy house - around 400k mark on a 20 year term. Put in 100k equity and purchase a second home (to live in) using remaining savings.
Advantages: Two properties for capital gains and renters assisting with one mortgage. We would need to obviously top this up
Disadvantages: Long mortgage on both properties

Than with option 1 - am I better off paying the bank back at the lowest rate (and every 12 months making a lump payment towards the house) or paying back on a 5 year term?

All so confusing!

Would appreciate any help.

Leon

 

[agentkhoo]

The 2nd option is a risky option. Given hikes in food and fuel prices, NZ's economic growth prospects will be affected in the medium term, given that NZ exports much of its products to Australia and the rest of the world. There will be global tightening of monetary policy which will cause the cost of servicing the mortgage to go up over time. As interest rates increase, unless you tell me that your bank is giving you a flat rate throughout your 20years. WHich is highly unlikely.

So my thought is to stick to option 1. Either that or in my opinion, shift out of NZ!
My country - Singapore is growing and has an open door policy when it comes to business expats on entrepreneur business visas. The job market here is also quite tight, as there is a shortage of human capital here, and that has hampered growth in several industries because there isn't enough people to do the work. The government gives out incentives for these conglomerates to relocate their regional HQ here. But I won't say much about the authoritarian government though (heehee...)

I've got friends who shifted to Australia and NZ mainly because they cannot stand our authoritarian govt. But if you are politically apathetic like me as long as there's decent economic growth, food isn't too expensive, and I can still run my business. Why not right? But we're digressing
Hope I've been helpful.

 

[Damian George]

Hi Leon,

Personally in NZ and Oz at the moment i would site on your hands. You are saving money and house prices are falling and have a large deposit.

Only buy the right house and always offer 10% min under the asking price and than sum.

You will be surprised that sellers will neg