Our Own house ? ...

Hi there,

What an exciting time for you

I'm afraid I'm going to go against the grain here and lean more towards the rental option.

Firstly, until you pay off your mortgage, you don't own the house, the bank does. When you rent, that money goes to your land lord. When you have a mortgage, you pay money in terms of interest to the bank.

Can you afford the mortgage repayments if interest rates go into double figures? If you conservatively work out what you're repayments would be at 10% interest, then you've got less to worry about for the future. Interest rates will rise!

I'm of the firm belief that house prices will fall by at least another 10-15%. Current prices are just not sustainable against our average kiwi wage.

I'd agree that getting on the property ladder as soon as possible is the best plan...BUT... you have to be able to afford it in the first place. There's no point landing yourself with years of debt, just for the sake of owning a home. If interest rates increase (or for what ever reason) you find you can't meet your mortgage payments and are forced to sell, you could quite easily find yourself in negative equity and you could be paying back the bank $$$$ for a house that you were forced to sell at a lesser value than what the bank valued it at when you took out your mortgage.

Sorry if I sound like the voice of doom and gloom, I don't mean to be. It's just a HUGE financial decision and personally I don't think $64 a fortnight is enough to fall back on when it comes to doctors, dentists, house repairs etc etc

What ever you decide, I wish you all the good fortune in the world

minik8e wrote: Mum2Mac wrote: Personally, I'd wait a bit longer. DP is a property investor and has been mentored but NZ's one and only property anaylist, Keiran Trass and the predictions are (based on the past trends of the property cycle) that house prices are going to drop even further. They have to so they balance with average wages. Some rule of thumb they use. ANYWAYS... If they're going to buy you a house that'd be awesome, but house prices and interest rates are going to drop eve further. Hold out for as long as you can, then go for it. If they can buy a mortgagee property then that'll b even better. Waaaaaaaaay cheaper! I would stay well away from a mortgagee sale if I was a first home buyer. The pitfalls and dangers with them, compared to a "normal" house sale, are extremely high, and you have pretty much no protection. If the vendor doesn't want to move out, it can be a costly legal battle to get them out, and they are also entitled to remove all chattels from the house (and it's not uncommon). This includes ovens, carpet if not tacked down, heating etc. The reason for this is that the bank does not have security over the chattels, therefore there is nothing that can be done if they are removed - you just have to replace them. It's fine if you are more experienced with house purchases, however not something I would recommend for a first home buyer.

Well said, Kate! I was stewing on this last night and was coming back into post something but you have said it sooo well. We do both investment and developing (and have done for at the last 7 years) and there is no way we would touch a mortgagee sale. I work in RE as well and some of the houses I have seen at the end have been striped of everything and literally been trashed...personally not worth the risk in my opinion.

or those that are too lazy to do too much work to the houses before selling them quickly

Bubie- you sound quite similar to us. We had the opportunity to buy a house off my IL's in Invercargill. The house is worth $240- we had to purchase at this valued price otherwise IRD throws up a stink about it being a "gift" or something. Because we couldn't buy the house outright, they have left some money in it for us.

To do this, we had to set up a trust. Basically its to protect both us and the IL's. So we have a IOU written up with the lawyers, and the house is owned by a trust, under DH's name, with DH and the IL's in the trust (so all 3 need to agree on something before anything can be done with the house-eg selling it!)
Setting up the trust, doing wills, and buying the house through the lawyers cost about $10k.

You might need to talk to your IL's to see if they have looked into doing a trust, as its a big thing $$ wise but good to protect you all.

I say go for the house, its do-able on a tight budget, you just gotta be concious of it!

Definately remember to check what you can get on WINZ etc, wff is a massive help, but don't forget rates. Most councils allow you to do it on an easypay system so you can pay fortnightly, instead of being lumped with a bill.

I'm a cross between hunnybunny and you I guess. We have our own home, but have 'borrowed' the land from our inlaws, as it was sitting their as spare essentially. So our mortgage is on the house, and when we sell we pay back the value of the land to the inlaws. Its essentially an interest free loan.

HB is right though, the trust protects everyone.

It's a pretty sweet deal, and it puts us ahead. I can't help but think that rent in throwing money away and why do that if you don't need to? Banks sure have tightened up in their lending criteria, but if you can't get a mortgage with the bank that the inlaws/people willing to help you out are with, especially if you can see their manager directly, it'll make it a heck of alot easier.

I'm under the understand rent/mortgage prices down south are pretty similar anyway? If you continue to rent, how hard will you really be on yourself about saving for that deposit if you'll be doing other bits and peices with your free cash?

I don't envy you, thinking through this stuff isn't easy!

Yeah i do recon that owning our own home would get us better off in the future then the renting side of things, i do admit that if we continued to rent then i would find it very hard to save for a deposit

It makes it a little harder for me as it is my partners parents and at times they are very hard to get on with, his mothers pushes for things to be her way and to what suits her best, so ive got to a little pushing to get it our way, not hers, so i think that my trusting them also has a part to play in my thoughts as i do find her hard to get on with. Thats also why im finding i sway both ways at times and keep changing my mind about things

Yeah i agree with you too on that I want to be safe rather then sorry