Paul’s verdict

But always have a little emergency money

You have very nicely summed up the current situation and while everyone’s money concerns are different, it is fair to say that interpreting where our economy will be in the future is a bit of a mystery. My crystal ball is as cloudy as yours, but let me peer through the mist of this pandemic and look forward.

I think we have some reasonably based facts that indicate the world will not come to an end. The death rate from Covid-19, while devastating for so many families, is not likely to impact on the size of our population but it will certainly impact hugely on our economy.

Where we can realistically take some hope about our economy recovering comes from the huge advances in medical science. With human trials happening now and hundreds of laboratories working on a vaccine, immunologists say we are very likely to get a partially effective vaccine.

So through the flaws in my crystal ball, I can see how our economy will be able to recover over time. But I suspect this will be far slower than we all would like.

In a few years, I do not think it is “pie in the sky” to expect our economy to have recovered, or at least be well on the way to recovering. While my outlook may well be wrong and sure to partially wrong, at least it is based on a realistic set of facts.

So, in your situation, I think you have drawn a good conclusion in that you may need to stay longer than you expected before moving to buy an older and larger property.

When it comes to the $3000 for your LMI, I don’t think it will make a particularly big difference whether it is built into your loan or paid off upfront. In regard to refinancing in the future, $3000 will not be a “make or break” amount in your overall mortgage. My preference would be for you to always have a little emergency money. In the middle of a very unpredictable situation, I would argue that keeping a few thousand dollars safely tucked away is a good plan. You could keep this is an offset account to your mortgage. This in my view is the best solution, you have the money working for you in the offset account, but available to you in a crisis. A future lender will be pleased to see some cash reserves and I really don’t see this strategy impacting your ability to refinance.

Like you I have no certainty, but a complete collapse of the financial state of the world is low in my view, but a quick and complete recovery is even lower.

I think we are going to struggle along, but we’ll get there. Do remember that for over 7000 years the world has recovered from plague, pestilence, starvation, devastating depressions and appalling world wars. So while things are pretty ugly at the moment, the world, our brilliant scientists and health system are better equipped than ever to deal with this rapidly spreading virus.