BadTomatoes

A couple of years ago, Olyvia and I decided that we’d move from Whitehills (as a complete aside, what gives with the older-than-it-used-to-be-and-no-house imagery in the Google map?) to somewhere cheaper to try and save towards buying a house.  We really liked living there, but with Samuel on the way and going back to one income again we felt it was time to move on.  For various reasons, we ended up moving to Waitakere to live with Olyvia mother.  The original plan was to stay here for a year and then move on, hopefully buying a place of our own.  When she then decided to go to Europe for 8 weeks, we adjusted the plan to reassess things after that (early April).  When that time arrived, some factors weren’t what we expected and so we put off decision-making another three months, using that time to consider what we wanted to do.

We’ve decided that we can’t start work on our ideal long-term home at this time.  So what we’re looking for is somewhere to live for the next two to three years – we’d like to be somewhere more permanent by the time Samuel starts school.

We’ve looked a lot at our financial situation, at what mortgages are available, and what a house would cost.  Even for a reasonably rural 3-bedroom house, we’re likely to need a mortgage of around $250,000 to $300,000.  That’s at the upper end of what we can afford at the moment.

What irks me most is that nearly all of what we’d be paying in mortgage payments would be interest.  Out of $2,500 per month, we’d start off paying around $2,250 in interest and about $250 per month off the principle itself (this would gradually increase as the principle decreases, of course, but in three years doesn’t change significantly).  That $2,250 in interest is just as much ‘wasted’ money as rent is – the only difference is that the profit goes to the bank rather than the landlord.  If we can find a place to rent for less than what we’d be paying in interest, and put aside the rest of what we would otherwise be paying for a mortgage, we’d be better off.  (It’s more complex than this, of course, but this is basically what it comes down to).

This doesn’t take into consideration the largest wildcard – capital gain.  If whatever we buy goes up in price $10,000 in a year, then that’s another $800 or so a month that we’ve gained.  This could definitely change the equation.  However, it relies on the price going up, and certainly not going down.  Neither of us are financial experts, and we’re certainly not close followers of the housing market.  However, it does seem to me that in the next three years house prices could stay the same or even go down (especially if the US economy continues to struggle).  Neither of us are really comfortable taking that risk at this time.

There are other advantages to owning – we can do whatever we like to the place, there’s no landlord to kick us out, I can claim a few more expenses (because wherever we live will also be my office).  However, there’s more flexibility with renting – we can leave whenever we like (no waiting for a buyer or for the market to be in the right state), and we can adjust the amount we save if necessary (if the Euro/NZ$ exchange rate cuts my income, for example).  Considering that we have zero interest in remodelling, and we’ve never had a landlord kick us out, these come out fairly even.

At the end of the day, we decided that neither of us really have our heart set on buying at this time, and we’d rather spend a little more time renting (but living with the mortgage budget, so our savings properly increase) for the next couple of years.  If things go to plan, or at least close to it, then we should have a deposit around $50,000 rather than $20,000, which will reduce the amount of interest we end up paying (and it’s possible that Olyvia might be interested in doing some paid work by the time Samuel goes to school, which would obviously make the largest difference).

So we’ve started looking at rental properties.  We’re completely sick of living in Auckland - there are a few advantages, but so many negatives (cost, too close to fast food, too crowded, too noisy, not enough space, …) that we were ready to move back to somewhere more rural within a month or two of living here.  It also makes a lot more sense to be closer to Whangarei and Whangaparoa considering that we travel there a lot.  So the aim is somewhere between Albany and Whangarei, probably not much further north than Warkworth.  We’ll probably move in three or four weeks if we can find somewhere suitable quickly enough.

We’ll still visit Auckland occasionally – visiting Debbie, going through to visit the Kellys, visiting Poppa/Nanna, but will mostly go back to leaving Auckland for those that like it.  At first we’ll probably be travelling a little more, since Samuel will probably finish off his current term of swimming, and I’ll play out my current netball season.

If you have any thoughts, as always, let us know (in the comments here, or via email).