This evening we are going to have a wee discussion about economics and how they relate to purchasing a house. Let’s take 2 couples (couple A and couple B).
Couple A have a sizeable deposit (nearly 50% of the houses value). They have no income. Their intent is to rent the house (because New Zealand is becoming a rental economy where most people cannot afford to own a house) with the rent covering the mortgage, rates, insurance, and a little left over each week to put towards maintaining the property. After 15 years the house will belong to Couple A and they can either sell it, or move into it in their dotage. If things turn to custard along the way couple A have a freehold house that the bank can take to cover their costs. In reality however couple A can weather the storm and the likelihood of the bank taking their existing house is pretty much impossible. Couple A have a great plan and in the current economic climate it is difficult to see how they could fail.
Couple B have managed to scrape up the minimum deposit (30% of the houses value). They both work minimum wage jobs and together earn $40,000 per year. Their plan is to pay their mortgage over 25 or 30 years and then own the property. They can then of course sell up or stay put for their retirement. Couple B put all of their savings into the house and if things turn to custard.. well.. they are pretty much f**ked and they will likely lose everything. Couple B are winging it and their plan is very risky.
So the question I put to you is this.. Who would the bank give a mortgage to?
If you answered couple A then go and look into the nearest mirror to see a person that is wrong! Why on earth would a bank give a mortgage to a couple of savvy people who have a great plan with very minimal risk of failure? In case you had not guessed it yet.. Claire and I are couple A!
If you compare couple A and couple B you will see that couple A has no income (except the rent they gain from their current rental property, and the rent that will be gained from the new property) whereas couple B both hold jobs for s**t wages that they probably hate.
This is basically why the bank will not loan couple A any money, because income from rental properties alone cannot be counted as income. What the total f**K??? In order for the bank to loan you money in New Zealand you must be employed (and have been for at least 90 days), and be earning a specific amount of money per year which is determined by a formula relating to how much money you want to loan.
This is basically a really stupid policy put in place by the stupid morons who think they know how the economy of New Zealand should be run. If you want to know why it is so f**king stupid you need look no further than our particular case. One of us needs to secure paid employment. After being employed for at least 90 days and if that person earns enough to satisfy the bank then they will loan us the money. The day the loan is legal then whomever had the job for 90 days can quit! And the bank will be all good with that because they crossed their t’s and dotted their i’s!!!
How f**king stupid is that? Pretty f**king stupid IMHO. The end result is that Claire is pretty upset and I’m going to have to perform like a f**king dancing bear for these rich old white men so that we can get a loan!
In the meanwhile ‘m going to write a letter to aforementioned rich old white men and let them know how totally f**king stupid their policies are.