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Your Mortgage Explained

Most New Zealand Families are unwittingly paying for their homes 2-3 times over. A lot of people don't realise how much their mortgage is actually costing them. They are constrained by a system that disadvantages them and the people they care about.

Why

New Zealander's are not stupid or lazy we just have to work within three limitations.

  1. We pay a reasonably high amount of tax per dollar
  2. We do not have banking structures that work for us
  3. We pay too much interest on our debts

Not only this, lifestyle costs continue to rise. You name it, it's going up: petrol, power, telecommunications, food, car and house maintenance. The list goes on.

What type of banking facilities do you use?

If it is a cheque account money comes in and goes out without earning any interest.

If you use a savings account, unspent money left in the account for a length of time may earn 3% interest. Unfortunately these savings are taxed and this means that savings actually grow at about 1%.

Income to expenditure ratio

Mortgage payments generally take about one third of a household's income. However it could be more than this with other high interest debt outside the mortgage such as credit cards, H.Ps., car loans and store cards add considerably to the debt burden.

All debt directly affects what any family has available for lifestyle costs and savings.

How banks structure your mortgage

In a standard mortgage, interest is front loaded, meaning that each repayment is mainly interest until about two thirds of the way through.

This interest is not charged out at a flat rate but charged every day. This means every day the interest builds on top of the amount charged the day before.

With front loading and all the accumulating interest it's no wonder we end up paying for our mortgages 2-3 times over.

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The contents of this website are solely for information purposes, and are not intended as, nor capable of being financial advice on any specific problem or particular situation. Neither Equitus nor any of our employees give any warranty of accuracy or reliability or accept any responsibility on any ground whatsoever (including liability and negligence) to any person reading this information. A disclosure statement is available on request, free of charge.