Mortgages and Investments

Mortgages

How much deposit do I need to buy my first home?

As I am sure you know by now, no question ever has an exact answer, but if you are looking to buy in Auckland and are looking at a house, probably terraced, for say $800,000, then as a minimum, you would need $80,000 with the caveat that your income would have to be no less than say $160,000. The exact income will depend upon the number of kids you may/may not have and what your fixed expenses look like.  There is also the issue of your credit rating, which I am assuming to be good.

If you are buying an apartment then a 10% deposit won’t cut it, so work on 20% and make sure that the size is more than 50 sq.m. excluding decks, as the number of lenders who lend on less than 50 sq.m. is very small.

Why won’t the bank lend me more?

If I was paid $20 every time I heard this question, I would be a rich man!
The short answer, is the banks are working on an interest rate of 7.8% when they do their internal calculations, not what you are likely to end up paying, which could be 3.99% on a 2 year fixed rate.

Does my car/personal loan matter?

In short, yes, but it all depends on your income. Banks generally like to see personal debts at $5,000 and below.

How many pre-sales do I need to secure, for the bank to finance my development?

Again there is no exact answer here, but generally, banks like to see their debt 100% covered by genuine pre-sales with a 10% deposit collected.

Investments

How much do I need to fund my retirement?

I am sure you know the answer by now!!  It all depends, but I suspect it is a lot more than people think- $100,000 or $200,000 simply won’t cut it. There are so many assumptions to make which can spit out wide ranging answers, so I think this is a question which should be debated face to face with someone who has been around a while!

Saving in term deposits won’t cut it either unless you are on a very high income and intend to have a very simple retirement where your one night out a week might be to the local quiz night (I actually like quiz nights by the way).

I have in the past mentioned Harmoney and Southern Cross Partners as possible investments you might like to look at, where you should get returns of 9%+ and 6-7% respectively. In this World of low interest rates if you don’t have a few high yielding investments your retirement pot will have to be that much larger.

The CNN Greed and Fear Index- this “indicator” has moved back into the Greed quadrant i.e. there are fewer bargains to be had.

The VIX Index is at 12.9 or less than half of what is was on Christmas Eve (36) when we were suffering the “bear” market drawdown. Do I like the VIX at current levels? Not really, as it suggests complacency and hence higher prices. So what to do in instances like this? Do not to stop investing, but make smaller investments spread over time and that way you should win over the long term.

If you have any burning questions please get in touch via phone, email or my website.