De­posit is the pri­or­ity

Eloise has lit­tle debt to worry about so ...

Money Magazine Australia - - ASK PAUL -

QI’m36 with a 44-year-old boyfriend. I work full time with a pre-tax and pre-su­per in­come of $73,500; my part­ner has a post-su­per and post-tax in­come of $45,000. I have no debt other than my New Zealand stu­dent loan of $19,000, which I pay at about $100 a month.

My boyfriend has no debt other than the $15,000 owing to a fam­ily mem­ber for his share of their jointly run small busi­ness (which is paid out of the busi­ness prof­its). He also sup­ports his age­ing par­ents (they live in a coun­try with­out a pen­sion) by send­ing them about $300 a month.

I have $60,000 in su­per­an­nu­a­tion and make ad­di­tional salary sac­ri­fice con­tri­bu­tions of $100 a month. My boyfriend has a nom­i­nal amount in su­per. Com­bined we have sav­ings of $30,000.

Should we seek to pay off all debts be­fore buy­ing our first home? Or, given the rate at which house prices are ris­ing, buy some­thing as soon as we get enough for a de­posit? Should I put more money in my su­per or put any ex­tra money to­wards buy­ing a prop­erty? Given my part­ner’s age I’m con­cerned that soon we may not be able to get a home loan with a stan­dard 25-year term.

Hi Eloise. It is very rare for me to tell any­one to ig­nore their debts but in your case that is ex­actly what you should do. Your New Zealand stu­dent loan, as I un­der­stand it, is sim­i­lar to the sys­tem here and has very gen­er­ous re­pay­ment terms. As it is a fam­ily loan, I sus­pect your boyfriend also has very re­al­is­tic terms on his loan.

At age 36, while su­per top-ups will re­ally add to your re­tire­ment ben­e­fit you have some 30 years to go to re­tire­ment, so I feel that build­ing a home de­posit should be your top pri­or­ity.

I am a strong sup­porter of home own­er­ship, so I do agree that buy­ing a place to live should be a pri­or­ity. With a joint in­come of some $120,000, a good de­posit and no high-in­ter­est debts, I am sure you will be a welcome client of any lender. I would do some re­search and find out what your bor­row­ing ca­pac­ity is. Please do not over-bor­row, though. In­ter­est rates are the low­est they have been in my life­time and at some stage they must move up.

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