Black Sheep

I think the house-mortgage lending system in NZ is similar to UK, neither of which I understand very well. It's this variable interest rate business that worries me - most mortgages here in USA are 15- or 30-year fixed rate, which of course means your monthly payment amount never changes over the course of the loan (FYI: interest rates here are at an all-time low - average is 6% for 30-year fixed!!)

We do have variable rate loans (30 years) which are popular with people who are sure they will be selling in 3-5 years, or who can't afford a higher rate just at the moment, but want to get their foot in the market now: you get a fixed rate (around 4% right now!! Amazing!) for 3 or 5 years, and then the rate can change each year by up to 2% (up OR down), but is capped at a 5 or 6% increase. So even then, if you start at 4%, you know your rate can NEVER go higher than 9% or 10%. (Most people, however, would refinance to a fixed rate as soon as they could. You would only choose this type of mortgage as a sort of gamble)

Needless to say, everybody is madly refinancing their mortgages at the moment to take advantage of these amazing rates, and often to get cash back too.

But when I look up mortgages for NZ, I'm not finding ANY fixed rate types of mortgage. There seem to be dozens of mortgage options, and none of them sounds a particularly SAFE bet to me. (i.e. where you get both a good rate AND the amount you pay doesn't change). On top of this, the interest rates there seem to be a good deal higher than they are here right now.

So, houses are supposedly cheap in NZ, but salaries are low too. Before I sell up my house here which is enjoying a low interest rate and is appreciating very nicely, I'd like to be sure that I know what I'm getting in to in the housing market in NZ. In other words, that I can get a mortgage that I can afford, and that isn't going to possibly break me down the road if rates start heading upwards.

Can anyone help me figure this out? Has anyone looked into NZ mortgages recently who can tell me how it works, and/or how the rates seem at the moment (very good? Good? bad? so-so? ) in comparitive terms?

MANY THNX.
TA

Cath

On Fri, 04 Oct 2002 18:13:40 +0000, The American
wrote:

    >I think the house-mortgage lending system in NZ is similar to UK,
    >neither of which I understand very well. It's this variable interest
    >rate business that worries me - most mortgages here in USA are 15- or
    >30-year fixed rate, which of course means your monthly payment amount
    >never changes over the course of the loan (FYI: interest rates here are
    >at an all-time low - average is 6% for 30-year fixed!!)
    >We do have variable rate loans (30 years) which are popular with people
    >who are sure they will be selling in 3-5 years, or who can't afford a
    >higher rate just at the moment, but want to get their foot in the market
    >now: you get a fixed rate (around 4% right now!! Amazing!) for 3 or 5
    >years, and then the rate can change each year by up to 2% (up OR down),
    >but is capped at a 5 or 6% increase. So even then, if you start at 4%,
    >you know your rate can NEVER go higher than 9% or 10%. (Most people,
    >however, would refinance to a fixed rate as soon as they could. You
    >would only choose this type of mortgage as a sort of gamble)
    >Needless to say, everybody is madly refinancing their mortgages at the
    >moment to take advantage of these amazing rates, and often to get
    >cash back too.
    >But when I look up mortgages for NZ, I'm not finding ANY fixed rate
    >types of mortgage. There seem to be dozens of mortgage options, and none
    >of them sounds a particularly SAFE bet to me. (i.e. where you get both a
    >good rate AND the amount you pay doesn't change). On top of this, the
    >interest rates there seem to be a good deal higher than they are here
    >right now.
\
Firstly NZ is **not** the US or any other country. It's the same
old story - forget what you are used to.

Interest rates are generally higher; people often remortgage when
interest rates fall in their favour. I know my sister did it several
times.

Your best bet IMHO is to make contact with banks, real estate
companies etc in NZ and ask questions of them.

There is an eloans website but I lost the url recently - shouldn't be
too hard to find.


    >So, houses are supposedly cheap in NZ, but salaries are low too. Before
    >I sell up my house here which is enjoying a low interest rate and is
    >appreciating very nicely, I'd like to be sure that I know what I'm
    >getting in to in the housing market in NZ. In other words, that I can
    >get a mortgage that I can afford, and that isn't going to possibly break
    >me down the road if rates start heading upwards.

I take it you have not been to NZ before.
Is there anyway you can afford to rent your house out for a period, go
to NZ and suss it out, then sell your house?
Unfortunately I don't think the IRS rental rules apply when you live
overseas [pity as you could have deducted all the airfares,
accommodation, meals, rental car expenses etc].

Cath