TommyLuck

A teeny bit long winded, but bear with me. I'm trying to couch my question so that you reveal nothing about your own life.

People are, quite rightly, sensitive about questions about money and about how much they spend and what they spend it on, it's their business. Fair enough.

So, here goes ...

After previously being offered a smallish house, it seems there are other options available to us. We are now a bit clearer on the cash were going to have available when we arrive in New Zealand and are looking in to a house purchase, I should add that neither my wife nor I are or have been property owners in the UK, so our first purchase individually and as a couple will be in NZ, so to that end I'm asking on the basis of a complete novice in terms of a home loan.

So, HYPOTHETICALLY speaking, what would you say is a reasonable percentage of a joint income to put towards a mortgage in New Zealand?

I hate this phrase, but I'm looking for a "ballpark" figure - I'm thinking 40% - is this too much considering the costs of living? Or, could one stretch more with comfort?

For instance I've worked out that if a family we're to have a joint income of 110k NZD, depending on what each earns the joint total take home pay would be in the region of 7k NZD, per month.

In your opinion, is it reasonable to put 40% of that (2.8k NZD) towards a mortgage leaving just over 4k NZD for paying rates and bills, running a car (or two), general living, enjoying and saving a little bit?

I realise there are many variables to this, but we live fairly simple lives in London, treating ourselves when the money is there to do so.

In short, would 4k NZD a month be enough for you and your family to live on and perhaps enjoy youselves a little bit, maybe a few bucks put away for a rainy day?

A one word yes or no would be perfect, but if you are willing to add more I'd be delighted to pick your brains.


NB This is a totally ficitious situation, neither me nor my wife have jobs lined up in New Zealand as yet, so I have no idea what our joint income will be.

Bo-Jangles

I have just done a very tight budget as we're trying to save some money for a holiday and like all things I am bound to have forgotten something. However, at present total expenses for the year expected to be $74.4k which will be about what you will take home of your hypothetical $110k if it were from one earner.

Our mortgage is $2.5k per month

Much will depend on how many cars you are expecting to run (we have two) and how far you're travelling each day so you'll have to do the sums according to how frugally you eat, if you're buying a house that needs work or decoration, if you need furniture and such like. We've no such plans to do anything in the house this year not withstanding unplanned issues that undoubtedly will arise. (i.e. already last week we had to buy a new land line phone & spare handset 'again' $200 in the sale)

My list looks like this and you can put your own numbers to some of them:

Phone & Internet $120 pm, Food Shopping, Electricity $170 pm, Water Rates $40 pm, Rates $2150 pa, Car Insurances $600 x 2, House Insurance $32 pm, Contents Insurance $98 pm, Rubbish Collection $200 pa, Bank Fees $20 pm, Petrol x 2 cars, Exercise class $15 pw, Mortgage $1250 per fortnight, Garden stuff, Car Service $200 x 2, WOF $48 x 4, Uni Fees $675, Uni Books $300, Outings $100 pm, Birthdays, Spending Money, Christmas Presents, Clothes, Doctors, Dentists, Shoes, Savings

We've no kids, no Sky TV, nor expensive hobbies. If you've kids you need to add school donations and costs of books / uniforms. Last time I had my car serviced it cost me $800, $150 for a denist visit and quoted $1200 to get a cap done (still not done)

TommyLuck

Bo-Jangles, bless you, that is brilliant.

I wasn't sure what type of response I'd get, this is more than I expected. Quite a bit more, if I'm honest.

Extremely helpful.

I will digest and have a think. I may have some (non-prying) questions.

Synky

Currently in the UK 20% of our income goes on a mortgage. When we got to NZ we are looking at more, like 33%. However we have a healthy deposit. There are some helpful mortgage calculators on the real estate.co.nz page which can help you with a rough idea.

Synky

Thanks Bo, I think I will use your numbers to flesh out my NZ budget.

TommyLuck

Thanks Synky.

Like I said in my OP I'm a novice when it comes to mortgages, I'm not so novice not to realise that we too have a healthy deposit, but novice enough that I'm not clear on how this benefits you and I?

Synky

A healthy deposit usually means you get better rates, as the bank has less risk. Also it seems you can get a mortgage earlier in NZ. The biggest benefit though is being able to get a better house than you can afford purely on the monthly repayments.

TommyLuck

Oh man, I'm dumb on this subject, have always rented and ignored anything to do with home owning (or any other loan for that matter) because it was never on the agenda, suddenly it's very much on the agenda!! Waaaaaaaaah!!

Better rates, as in better percentages?

I notice with UK mortgage sites whether a comparison site or with a bank/provider, when running a query you're often asked for the "deposit amount" leading to how much you can borrow and what the repayments would be.

I haven't found this with the NZ mortage sites, whether they be comparison sites or going to the banks and mortgage provider websites.

This threw me a touch, they seem to be very simple in that they literally ask how much you want to borrow and what that repayments will be, which seems almost pointless because they know nothing about you and therefore nothing about the risk.

TommyLuck

I've also noted that a lot of the advertised rates are a lot lower in UK than NZ.

In the UK a lot are advertised at 2% - 4%, usually with 35%+ deposits mind you.

In NZ they're advertised between 5% - 7%, with absoutelty no mention of what the deposit would be for this rate.

Synky

Yes better interest rate. Uk interest rates are a lot lower than NZ.

Usually I would do it all in myself but in NZ I would use a broker just because they know the market.

For a crash course in mortgages (or anything financial) I recommend moneysavingexpert.com. It's all UK specific products but the money advice would still be sound anywhere.

Mark Smith

Tommy, we've just gone through this process in Sept. We were given a mortgage offer from ANZ. Originally for a house at $430000 - a $410000 with $20000 deposit, the bank offered 5.49% with a low equity premium (fee) of about $5500. We were also required to have a valuation and building inspection (about $1200).
I toddled off to westpac and got a quote from them, a similar rate, but a much lower low equity premium. This was then played off against ANZ. We ended up buying a house for $390000, managing to save a $30000 deposit. The bank waived the fee, dropped the rate to 4.95% and gave us $2000 cash back on completion. On our September income this was just under 30% of our take home pay. We've been here 13 months now and working for 8 (permanent resident visas). Although Chch rates are rising fast and building insurance was $850 for the year.
I'm pretty sure they are desperate to lend at the moment, as they were stupid enough to give us a mortgage.

TommyLuck

Mark, your very open response is to be commended.

I'm very thankful of the replies so far.

By the way, where do the banks stop? A low equity premium? Jokers!!

Good to know there is some leeway and negotiation to be had. I do enjoy a good old battle of playing the competitors off of each other. As well as the "I'll take my money elsewhere then" card.

Purely based on my limited research, interesting to note, that at the moment in the UK I'm not sure you would have got a 4.95% mortgage on a house worth £200k with a £15k deposit, so well played.

A point that suggests that they are indeed keen to lend.

TommyLuck

Ah yes, forgot about moneysavingexpert.com, thanks for the reminder.

Bo-Jangles

There's little risk in the banks lending you money against a property because whatever happens they will win. Ultimatlely they own the house until such time as you have paid for it in full - so if you can't pay your mortgage they take the house and recover the debt from the proceeds via mortgagee sale (repossession).

In the UK you used to have to take out an indemnity insurance (probably still do) if you were going for 95 -100% mortgage; here you pay a low equity fee on the repayments (same difference really). The published % rates assume you meet the latest criteria for deposits and this will depend on how flush the banks are feeling; at 'worst' for a time early in the recession 2008 it was 20% deposit required but think they have slackened off on this now.

TommyLuck

Cool.

I've got a mate who is a branch manager of a bank near Wellington on the case, but your guys info about how you do it is excellent.