Your mortgage, around 33% of post-tax income, is reasonable, but "normal" varies by location and income. Consider local housing costs, budget, long-term goals, and variable interest rates. Flipping a house can be profitable, but assess market conditions, your skills, and consult experts. Mortgage should align with financial goals. Seek advice as needed.
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“So our mortgage is around 33% of our monthly income (post-tax), about 25% pre-tax. Is that pretty normal for a 30-year-old couple? It’s our first house. So we’re quite excited. Wondering if I need to renovate and flip. Or is this normal?”
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Your mortgage, which represents approximately 33% of your post-tax income, is often considered within a reasonable range by financial advisors. However, what’s considered “normal” for mortgage payments can vary depending on various factors, including your location, income, and expenses. In New Zealand, housing costs can be relatively high, especially in major cities like Auckland and Wellington. To assess if your mortgage is appropriate for your situation, it’s essential to consider a few key factors.
Firstly, examine the local housing market. If your mortgage aligns with or is below the average in your area, it’s a positive sign. High-demand locations tend to have higher housing costs. Secondly, ensure that your household budget accommodates your mortgage payments while still leaving room for other essential expenses such as utilities, groceries, and savings. Thirdly, consider your long-term financial goals. It’s crucial that your mortgage payments don’t hinder your ability to save for retirement, emergencies, or other significant expenses. Additionally, be aware of your mortgage interest rate, as variable rates may lead to increased monthly payments if interest rates rise.
As for the idea of renovating and flipping your house, while it can be a lucrative endeavour in the real estate market, it’s also a substantial undertaking with its own set of challenges. Before deciding, evaluate the local housing market to gauge the potential return on investment. Assess your renovation skills and your capacity to take on such a project. It’s often wise to consult with a real estate professional or financial advisor for a comprehensive analysis to determine if flipping your home is a viable option. The key takeaway is that your mortgage should align with your financial goals, not strain your finances, and allow for other essential expenses and savings. If you have any concerns or questions, consider seeking guidance from a financial advisor who can provide personalised advice based on your unique financial circumstances.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
