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203 posts

Master Geek
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# 175210 21-Jun-2015 20:40
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Evening all.

So ive been saving for a house for a while now. Its always been my goal to have my own home.
3 years ago I meet a girl who had already brought a house about 12months earlier. Me, her and her sister all live in the house, and until the start of this year, I only paid the 'rent'.

My partner gave birth 6 months ago and isnt working at the moment (taking a year off - another 6 months)
We looked at getting a 2nd property, we went into the bank that has her mortgage and with my savings and her equity it would be possible (Based on her being back at work)

before this decisions is made, what is the best thing to do with my savings?

her interest rate was fixed at round 5.5% but that is due to come off. (I see mentions of 5% 2 year mortgages at the moment)
My savings is with rabobank, so my current interest rate is 4.05%

My situation is as follows:
$15k in Savings (inc about $2k in managed funds that havnt been in long)
$14k total in kiwisaver


So for the best return for money, what would be my best approach?
My thought is the best return for money would be for me to move my savings onto her mortgage, taking a principle down a chunk - but not actually 'buy' into the house.
We have talked about putting extra money on the mortgage next year (over and above the required) to try and smash it back a bit.

So in my head, im getting 4% interest saving it, but not being charged 5% on the mortgage.
interest Calculators confuse me a bit, I found a compounding calculator that said:
5% per year on $20k = $1128.16 interest
4.05% per year on 20k = $825.21
So that would mean $302.95 extra paid off the mortgage then if i saved for a year and put it on the mortgage.
However, sorted.org 's calculator says 4.05% on 20k for a year is only $402 in interest.

Now, for kiwisaver.
Because she already owns the house, we are in a position where i dont actually 'need' to use my kiwisaver to buy into the house.
However if I buy into the house, I can only do that once, so im trying to work out the best time to actually do that.
My thought is that kiwisaver would be best used in a few years.
at the moment there is $14k, so apparently the $1k opening and what the government puts in cant be used. so that means about $10 could be used.
The house is also under the value for our area, so I could get the $3k for first home (I know there was talks of changing this to $5k, not sure if thats gone through though)
Im on 4% kiwisaver, If im putting in $40 per week, my employer is putting in $30per week.
to me, thats a 70% per WEEK interest rate. better return than paying the mortgage.

over the next two year, at $70 per week thats $7280 (excludes govts contributions)
over 4 years that $14560
With the orginal $10,000ish on top of that.
More years, more bonus

Would it be better to wait and use it when its at a higher value, or better to put a chunk on the mortgage earlier and then its done.
Thats how I work it out, buy I could be wrong, so im trying to find out.

Flaws and Notes
1) This doesnt account for any relationship issues that may or maynot happen in the future
2) in resent evaluations (estimates) the house is getting close to the first home buyers limit, meaning at this rate, before a couple of years is up, I might not be elligible for the $3k (or $5k)
3) buying a 2nd house with kiwisaver now could mean capital gains on that property with or without capital gains tax
4) If I do buy in now, if we do decide to get a 2nd house, it would be all equity no savings

anyone got any thoughts, what ive done right or wrong.

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  # 1328859 21-Jun-2015 21:33
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Have you verified you actually can withdraw your kiwisaver to 'buy in' to the home? That option may be off the table, depending on how HNZ/IRD view it.

Paying down the mortgage is almost always going to be better value than simply having cash savings at a relatively standard interest rate. It's more about a cashflow question - if you use all the savings, how are you placed to deal with unexpected costs that come up? Car breaks down, $3k to fix, for example.

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  # 1328862 21-Jun-2015 21:38
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If it was me I wouldn't buy another property now, review in 6 months.

Too much uncertainty, wait til she is settled back at work.

What happens if returning to work doesnt go well for what ever reason.
(ie once back at work partner decided she actually would prefer to stay at home, - this happen to friends of mine)

You have taken on extra debt at a time of increased stress (returning to work).

Have you factored in the cost of child care.

Putting the saving into her mortgage thereby reducing the principal is sound, except, if it isn't your house you aren't actually getting any return and it relies the mortgage needs to be structured already.If you breakup will she repay your contributions

If you are in a de facto relationship have you checked that it doesnt mean you already have a first house.

Net
Get revolving credit mortgage component for the liquid 10k savings and put the 10k into that and wait for another 6 months and review.
Get your name on the mortgage so you own some of the house.
The interest difference isnt that big either way.

 
 
 
 


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  # 1328905 21-Jun-2015 23:08
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Is marriage on the table here? That is an expensive thing usually - you may want to allow for the cost of that in your calculations.





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  # 1328913 21-Jun-2015 23:15
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Make sure you understand the relationship property's act is my advice

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  # 1328925 22-Jun-2015 00:02
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Why are you wanting to buy a second property, as you can only live in one? Are you wanting to buy it as a rental? Don't you actually have to live in it to qualify for the subsidies.? If you are buying it as a rental, you really need to do your sums. eg can you gety enough rent to cover all the costs including interest, and still make a profit, and not reply on captical gains to make a profit. I think you need to go to a finacnial advisor, and probably a lawyer to sort out ownerships of assets. As you have been together for 3 years, and I pressume you don' thave any form of contract with your girlfriend you are possibly already a part homeowner, so whether you will still qualify for the 1st home subsidy? I don't know, this is why you need to get some professional advice. But if you are buying in Auckland, I would be very wary buying a second house, as it is a big bubble up there, and I can see many NZers ending up owing more to the banks than their shack is actually worth.



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Master Geek
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  # 1329155 22-Jun-2015 12:09
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thanks for the thoughts

I hadnt considered money aside for emergencies, but would have to have access to money.
Having a portion of the mortgage on revolving would probably be the best. so we could pay off max, but get access if really needed.

our friend who had been in a relationship for about 6 years brought into his house when they got engaged and used her kiwisaver, so at least in the past it was possible.

childcare had been considered, for next year. but extra payments would still be possible.
also considered is savings for if we have another little screamer.

if she decides not to go back to work then we would need my savings to survive but i dont think that is going to happen

perhaps i should go into the bank and ask these questions

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  # 1329157 22-Jun-2015 12:12
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mattwnz: Don't you actually have to live in it to qualify for the subsidies.?


Technically you have to live in it for 6 months to use the first home buyer subsidy, but it's not like they check. 

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