Don’t sit on a mort­gage

The Tribune (NZ) - - GARDENING - ROB STOCK

GOLDEN RULES

❚ Have amort­gage strat­egy ❚ Aim to min­imise in­ter­est costs ❚ Never pay debt off on the bank’s timetable

It’s been easy to be lazy about the mort­gage as house prices rose, but play­ing with a mort­gage cal­cu­la­tor can change lazi­ness into debt-bust­ing ac­tion.

I don’t know about you, but my list of life mis­sions never in­cluded mak­ing bank share­hold­ers rich.

Plug in the amount you owe, the in­ter­est rate, and the term of the loan, and an on­line mort­gage cal­cu­la­tor will tell you the amount of amount of your fu­ture in­come the bank will get from you.

Say you owe $500,000 (a debt peo­ple aged 50 or more never had to shoul­der to do some­thing as or­di­nary as buy­ing a house).

And say you be­lieved the av­er­age in­ter­est over the life­time of the mort­gage would be 6 per cent (a bit low a reckon), then you will trans­fer $579,190 of your fu­ture in­come to a bank.

The awe­some thing about mort­gage cal­cu­la­tors though is that you can work out the value of mak­ing ex­tra pay­ments now.

Stick in an ex­tra $50 a month, and, in the above case, the

‘‘I don't know about you, butmy list of life mis­sions never in­cluded mak­ing bank share­hold­ers rich.’’

amount of in­ter­est the bank will get drops by $30,000.

And the bor­rower would get to say good­bye to the bank a year and two months sooner.

Makes you want to pay $100 ex­tra month, or $200, doesn’t it?

Mort­gage cal­cu­la­tors make plain the wages of fru­gal­ity.

These days I only used mort­gage cal­cu­la­tors for work.

My favourite is an Amer­i­can one, partly be­cause it pro­vides a tragic re­minder of what sane prop­erty prices look like.

When I last popped on the sug­gested ‘‘home price’’ was just $362,500.

In the US, that’s a nice home. In Auck­land it’s a fes­ter­ing rat­trap so squalid the SPCA would pop round with very stern faces if you tried to house a dog there.

Sec­ond, the ‘‘sug­gested’’ in­ter­est rate is cur­rently around 4 per cent.

But if you are split­ting your home loan be­tween float­ing and fixed, the West­pac mort­gage cal­cu­la­tor might be more help­ful.

Newer home­own­ers have to be awake to their mort­gages in the way pre­vi­ous gen­er­a­tions didn’t.

Big mort­gages, ageist em­ploy­ers, in­se­cure work, and the threat of jobs be­ing au­to­mated away or shifted over­seas, all make get­ting a debt-free home a pri­or­ity as early as pos­si­ble.

For them, fa­mil­iar­ity with a mort­gage cal­cu­la­tor is es­sen­tial.

123RF

On­line cal­cu­la­tors can tell you many things, in­clud­ing the time you will spend in the smallest room.

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