Holiday in NZ vs. Here for good
Filed under: Cost of living, Getting to New Zealand, Hubby's Views, Life in New Zealand
A friend from the UK came to visit yesterday. He’s been holidaying in NZ on an almost annual basis for the past two decades. Before we emigrated out here, he was one of the few people I knew who had really spent any significant time in NZ – so he was a great source of information, places to go, what NZ was really like etc.
This time, he is in NZ for six months after he left his former employer with enough cash in hand to tide him over for a year or so. {nope, he’s not one of the Westpac fugitives}.
So as you do when you’re young(ish) and single, he’s spending six months travelling around NZ, staying with various friends, and enjoying being away from the UK winter. And UK politics (until today – sorry D!)
He’s found this trip quite a revelation. Where as on previous holidays he’s been ‘right which restaurant shall we head to this evening?”, ‘cos you do when you’re on holiday and NZ restaurants are (relatively) inexpensive. Only this time, with no job and much longer here, he’s been to the supermarkets – and looked at the actual cost of living here.
So I asked him, what did he find as the major differences on the extended trip? In order of immediate response he said;
Bloody hell, the cost of [supermarket] food is high
I can’t believe the [high] cost of electricity
OMG, Kiwi’s don’t know how to drive, they’re lethal on the roads
Enough said.
Now it sounds (to us) like he’s living it up here, some motorcycling, off to get his glider pilots license, more biking, horse riding, more motorcycling and the odd biking race, plenty of outdoorsy stuff that is what NZ does best. The joys of free time and no domestic obligations, but he’s shocked at the cost of living.
For example, his UK electricity costs for three months equate to different friends average NZ monthly electricity costs.
For all that he’s spent plenty of time riding the roads of NZ previously, it’s only now that he’s absorbing how poorly some Kiwi’s drive. We’re all still undecided whether this is because;
- People are (relatively) inexperienced, compared to driving in and around London on a weekly basis. Or long stretches of packed motorways for hours on end. Or stuck in half hour traffic jams during a morning rush hour to get into some middle market town for work/shopping/whatever
Or
- With the slower speeds and lower levels of traffic, people are more relaxed, and there really is time to pull out right in front of other cars because they’re only traveling at 50 kph. And besides, the other guy can always stop if he gets too close or almost hits me.
Not that any of this seriously colours his perspective on Quality of Life vs Standard of Living. The Standard of Living may be higher in the UK, but you have to work harder or longer to achieve that, and then work even more to maintain it. The cost of servicing a BMW M3 can be a bugger.
He still see’s that NZ has a better Quality of Life, even if traffic has grown a lot in 20 years. Now he (had) a really good job, with high pay, good bonuses and plenty of perks. So he’s used to spending plenty of money on things as required. The cost of living is still a shock, which is at least reassuring for us that we’ve not got a uniquely daft perspective.
It’s interesting to hear from someone with a long term love affair with NZ, that he see’s the same stuff we did five years ago when we arrived.
And that it’s still worth being here.
Trying to sell Avalon’s Guide on Amazon
I do not think there is enough coffee in the universe to get me through this one.
It’s something that we have been toying with all year – but not dealt with because it always seems difficult, and we have been horrendously bogged down with Immigration issues.
But I thought (stupid thing to do) – lets have another crack at it.
Well, if you thought getting a straight answer out of Immigration was bad – try getting one out of Amazon.co.uk’s optimistically entitled “Seller Support”.
The basic issue we have is that I can’t ask a question about getting my book listed because I don’t have a seller account. And I can’t get a seller account becuase I’m overseas and its bloody complicated. But I can’t ask them for help with that because – I don’t have a seller account.
The fact that I spend a small fortune with them despite living abroad seems lost in the depths of wherever peoples brains go when they have had enough of being inside the head of someone who cant read an email and use some common sense.
So maybe one day – people will actually be able to place an order for Avalon’s Guide with Amazon – and I promise I will keep trying – but if you are wondering why you have to buy direct from me – this is why.
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Avalon’s Money Thread: Am I a Big Spender?
Filed under: Avalon's Money Thread, Cost of living, General Budgeting
So in reality, do you just take out a certain amount of cash and try to make do with it? I try to do that, but almost always something unexpected comes up, such as filling a gas tank or topping up my bus card… Something that you can’t really delay. So can you tell me how do you control yourself?
Firstly you CAN work on a cash only budget and this works well for over spenders. But that is really talking about people who literally spend spend spend. A cash only budget is where you take out a set amount of money each week and that’s IT, is said to help by making people AWARE that they are spending their money. When you use Credit cards, you never see the real money so for many people it helps when they have to count out $20 bills to buy that $400 coat! This can be really helpful in getting over any “consumerism” habits you may have. Moving to New Zealand of itself won’t necessarily turn you into a non-consumer. Learning to spend less money isnt something you get by osmosis from Kiwis – who overspend as much as anyone else.
When you look at what you are spending the money on, ask yourself:
“Do I NEED this or do I WANT this”?
If you WANT it, it needs to wait till you have the spare money or it comes out of sanity allowance. If it’s a NEED, then budget for it. Then when looking at items you are going to buy, look at the PRICE but also look at the VALUE. Ask yourself:
- “Is this thing WORTH what they are asking for it?”
- “Can I buy it cheaper elsewhere” and
- “Would I rather spend that money on something else”.
You would not believe how much money I HAVEN’T spent by asking those questions. Except on coffee which in any universe is worth any amount of money charged as far as I’m concerned especially when a friend and a natter is involved.
How do I control myself???
Well, when we were in debt I woke up and realised just how much the banks were making out of me. And how ill I was getting because I was so worried about how I we were going to pay the bills. Now I don’t remember the last time I couldn’t sleep because I was worried about how to pay a bill. THAT is what keeps me going, and stops me buying stuff I really don’t need, gets the library books back on time and makes me do crazy things like “budget days”. After a while I even got to enjoy it!
Just had another thought about this. I got my Moneysaving expert email today and it’s talking about debt. I know I’ve just mentioned credit cards on here but I just need to say that if you are struggling to cope with money, DONT get a credit card. I use one ONLY because it saves me money to do so, I get cashback rewards and it costs me nothing to do so. I ALWAYS pay off the full balance every month, so I pay NO INTEREST. (This makes my Mortgage cheaper because I have a revolving credit mortgage)
If you cannot do that, using a credit card can be VERY bad for your finances. Interest charges are too high and if you can’t pay the full balance, your debt spirals out of control way too easily.
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Avalon’s Money Thread: How do I start budgeting?
Filed under: Avalon's Money Thread, Banks, Cost of living, General Budgeting
If you need to do this (or want to) then pretty much the first step is to look at what you already do. There are lots of ways of doing this. I always keep accounts anyway and this is by far the best method. I use Quicken, but there’s also MS Money, you could use Excel Spreadsheets, or even old-fashioned paper and pen ( if you still remember how to use them). If you don’t keep accounts now, then consider it because if you are in a tight money spot, it’s worth its weight in dollars. But in any case in order to know what you are spending, you need to list all your outgoings for the last year, or as far back as you can go.
Sit down, grab a cup of coffee and some Tim Tams, probably a calculator and a sharp pencil too, and get to it. You can get the information you need from bank statements, any receipts you have, your past 12 months bills, and pay slips (because you also need to check how much you have coming in). If you keep accounts, all the info is there (or print it off if you use Quicken)
There is actually a good spreadsheet you can put it all in at moneysaving expert:
If you don’t want to use that, list everything under as many headings as you need: things like Mortgage /Rent, Food, Petrol, Cinema, clothes, whatever headings you need. One important thing to be aware of – you need to be ruthlessly honest about how you categorise your spending. If you only have six headings – its not enough. We currently have 60 heading that we use in our budget.
The next step would probably be to “analyse” all the stuff you write down and then look at where and why you spent that money. It’s probably time for a top up on the coffee and some more Tim Tams (I think trying to budget is hard enough without worrying about calories as well). Look for things that are costing you money that don’t need to. Easy ones to start with off the top of my head are: Bank fees (have a friend who was paying $15 a month to take $20 out each time from another bank’s ATM rather than walk an extra 5 minutes to the banks’ own ATM), papers and magazines (I know they are fun but you read ‘em in 10 minutes and that’s it), library fines (again costing a fortune in some cases as opposed to getting books back on time). Doing this can be a bit depressing – the Tim Tams should help with that- but you may just spot a few things.
Look at your bills, and see if you can cut them. Are you on the cheapest electricity supply? Can you get your phone bill cheaper? (I’m just changing to Ihug, which should save me nearly $100 a month!) Are you on the best mobile plan (and if you both have mobiles, are the both Vodaphone or both Telecom because it’s expensive to call from one to the other)? If you are in the UK, use moneysaving expert to check for cheaper suppliers.
Now you have the bones of a budget. Use the headings you have from the first bit of this exercise and look at how much you are overspending. That is, are you spending more than you earn? If you have managed to work out cheaper suppliers for most of your big bills, then what’s left covers your other spending. If you need to cut spending more, then decide on what is important to you and what you can fairly easily not have without as much pain and suffering. I could probably manage going out to eat less, but if someone took my coffee budget away there would be hell to pay. By this point, you should now be getting an actual “budget” or spending plan (in the way that saying a diet is an “eating plan” is supposed to make it easier to eat a lettuce leaf and a carrot instead of chocolate cake). This is the goal to stick to, what you should aim to be spending on average on all your requirements. Changing habits is not easy but apparently it actually only takes 28 days for something to become a habit. .
And for bills: work out your average monthly bills and put that much aside into a savings account each month, so you always have money to cover them (or do this fortnightly if that’s when you get paid as you may do in New Zealand). Make sure there are no fees for your savings account. When a bill comes in, pay it, and move the money from your savings account to your cheque account to cover it.
Next I have to say that I really think the sanity allowance is a must. This is a “Bellism” which gives both of you an allowance each payday. Small but something you can spend on whatever you like, without justifying it to the other person. You want to spend it all on chocolate that’s fine . You each have to have the same amount, one of you cannot get more than the other and until you find your feet, this is where all your treats come from. We can budget for meals out and things like that, but if you can’t, use the sanity allowance for coffees, or cinema. It really up to you to decide what has to come out of that allowance and what you can afford to “Budget” for.
And something about budgets: don’t always think of it terms of “what I can’t afford because I don’t have the budget for it”. Use a budget TO BE ABLE to afford what you want. If you want to be able to go out for a meal once a month then think about what you can do to wangle the money from somewhere. For example: if you are paying bank fees, just think what that could pay for if you worked out how to stop it!
Don’t see the need for a budget as a bad thing because it really isn’t.
I found the first week was the worst, when you start to look at exactly how much money you spend and what on. It’s incredibly daunting at first but please believe me once you start, you may even find it utterly liberating. Its one thing to buy yourself a jumper and then panic because you don’t really know where the money is coming from to pay the credit card bill, but imagine what its like going out to buy a jumper because you KNOW you have the money set aside for it. You may not buy as many jumpers, but the ones you do buy; you are not going to be in a cold sweat over!
Reading through that makes it sound like I think it’s easy but I do know its not. But it’s possible. We have “Budget days” probably every 4 months where we sit down and look at ways to improve what we do (but then I’m a bit daft in the head when it comes to this ) the last day we shaved about $150 off our spending plan
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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Avalon’s Money Thread: Buying Houses in New Zealand.
Filed under: Avalon's Money Thread, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing
Many people find the whole process of buying and selling houses here a lot easier than at home (especially in the UK). In many ways it is but you still need to be very careful. Agents here are not angels and they are just as likely to try pulling a fast one as an agent in the UK. Especially once they know you are a “filthy rich migrant”.
Neil Jenman’s book “Don’t Sign Anything” is a really good book explains a lot of the nasty tricks that agents can pull. It’s a bit of a scary read but I figure forewarned is forearmed and it’s good to know when you are about to be sold a lemon! It’s especially good at talking you through the auction process and what to watch for.
My main advice is literally “Don’t sign anything” not without a solicitor looking it over.
You wouldn’t do it in the UK so don’t do it here. Always get your solicitor to check the sale & purchase agreement (s&P) before you sign it. The seller’s agent often draws up the contract and a lot of them are less than trustworthy most of the time. Always remember: they work for the seller, not for you. If you don’t understand something ask your lawyer and not the agent. The lawyer works for you, and will give you the advice that works in your interest.
Be extremely wary of anyone that the agents recommend to you. Whether its solicitors, mortgage brokers, valuers, builders, chief cook and bottle washers or Uncle Tom Cobbley. You can never be sure that they are not paying “commissions” to the agent, so they are not truly independent. If you are not the only one paying then they are not working for you. If you wish to use people the agent recommends – ask the agent upfront if they get a commision. They do not have to volunteer the information, but they do have to tell you if you ask.
Always also get a full builders report and valuation done. I want to know of any problems before I buy just to make sure I’m really not buying a lemon.
You can get a lot of useful info from websites such as QV (Quotable Value) and Terranet on local values. However it’s also worth paying for a proper valuation done especially if you are buying fairly quickly after arriving in the country. It will cost you probably around $300 – $700 depending on the property and where it is, but bear in mind the property is gonna cost over $300,000, so its worth knowing you are not going to pay too much. QV and Terranet do not do proper valuations - the reports that you get from them will not tell you if you are about to pay too much for the house.
Paying Deposits on houses.
Deposits are usually 10%, but you can organise a lesser one if you want. That would go in the S&P agreement as well. We gave a 5% deposit because this was a big house and 10% was a fair whack of money. If you and the seller arrange just a $5000 deposit thats fine – its between the two of you. Agents will probably tell you it has to be 10%, and its a load of rubbish. Bear in mind with deposits, which unlike in the UK the deposit is paid to the Agent, not to the lawyerss because they want to be sure they get paid their commission before anything else!
When you have the S&P drawn up, it’s fairly standard to have a condition in there that says “Subject to finance”. Basically it means if you can’t get a mortgage, you don’t have to go through with the purchase. But just be aware that it should actually read “Subject to finance satisfactory to the purchaser”. This can avoid you being forced to take a mortgage out that is going to cost you more than it should including sometimes being forced to borrow off the seller! This is one of the reasons your lawyer should check the agreement before you sign it.
My best advice is:
(A) Not to rush into anything and do LOTS of research. Talk to as many people as you can who know the areas you are looking at. It may look great but is it? You need to find out what the specific concerns are in each area, especially any sunlight issues, because if the sun doesn’t get onto your property for part of the day or even year, you are going to be VERY cold! (Big problem in Wellington for Eastbourne, Seatoun, and the Eastern Bays)
(B) Get a valuation on any property you are interested in. It will cost a couple hundred bucks – but it tells you what it’s really worth – from someone who works for you not the seller.
(C) Dont use any companies recommended by an estate agent. They may be paying “Commission” (aka Kickbacks) to the agent and are therefore NOT independent. If in doubt ask the agent – they have to ‘fess up.
(D) Check out some auctions and see what happens. Watch out for “Vendor bids” where the agent bids the price up on behalf of the Vendor. It’s totally legal to do that here. We went to one auction where we had been told the house was expected to go for “top 400′s”. The bidding started at 600. There was only one guy bidding (and lots of interested watchers). He bid against the agent only and ended up paying $780K. I cannot for the life of me work out why he didn’t just stop. But ho hum not my money.
(E) Use a Lawyer from the start of the process. Once you sign a Sale & Purchase agreement in New Zealand – it is a Binding Contract and exceedingly difficult to get out of if you change your mind. Be absolutley sure it is right before you sign. This is the biggest difference between the UK and NZ house buying systems.
Updates:
Obviously since writing this about 3 years ago, Ive had a lot more experience of buying houses and dealing with Real Estate Agents. Ive met a lot of agents who are spectacularly good at what they do, and just would not do anything dodgy. Ive unfortunately met one or two for who the word “Ethics” doesn’t mean a whole lot.
You should also be aware that there is a new Sale and Purchase agreement out, written “in plain English” by the Real Estate Institute. That’s a bit like the Immigration agent industry getting a law written that says only they can give immigration advice. If you want to use it – fair enough – but if your lawyer says its a bad idea – please listen to them. Also know that although some agents may claim it is their Company Policy to only accept the new S&P, they are not in a position to do this – they have to accept an offer written on the original S&P whether they like it or not. If you have any problems – speak to your lawyer. I think its worth noting that I don’t know of any Property Investors that will use the new agreement – and its their job to understand how these things work. I wouldn’t touch it with a bargepole!
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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Avalon’s Money Thread – should I pay off my home loan as fast as possible?
I have always thought that paying your mortgage off as quickly as possible is a ‘given’. Not according to these guy’s. That did worry us.
I actually heard a rather good explanation of this from the ASB advisor. I had always thought that getting the mortgage off your back was to be our first priority, and for many people it may still be the best option so I wouldn’t discount it out of hand. That really depends as far as I can see on your personal circumstances, finances, and how good you are with money. I fully believed in this principle when I came here purely from reading the Anita Bell books. I had never really appreciated just how much money you actually pay for a house when you take into account the interest payments over 25years.
Our house cost $595k to buy. But over 20 years taking a 265K mortgage will add 269K to the cost so it will actually have cost us $864k to buy! Interestingly – if you are me anyway – by paying fortnightly for the whole 20 years we save a whopping $53,000 on the cost of our house- that’s a whole lotta coffee!
15142 cups to be precise
However where the advisors are coming from is that if you pay off your mortgage and only do that, you still have no savings with which to live on, so you still have to work to earn an income. Whereas if you were to save / invest at the same time as overpaying a bit on your mortgage you get rid of the debt earlier (and save money on interest charges) but you also have money set aside that you can now live on (or investments that generate an income). That’s the idea anyway!
Hi, everyone, pardon me if I’m asking a silly question but from reading the forum, I have this feeling that most people take up mortgage loan of about $200K to purchase a house, even though they may have the spare cash. Can anyone enlighten me on the reason for such arrangement?
Well, I can’t exactly answer that as for a start if I had $200k in cash hanging around – I would have used it to buy the house instead of taking a mortgage. However – there are 2 theories that could explain at least why some people would do it.
Firstly – revolving credit mortgages are popular here. We have one of these, and part of our mortgage is on this scheme. (About $100k) Now we didn’t actually need the whole 100k, as we have some extra savings, so at the moment only about 60k of that is being used. A revolving credit facility is like a big (huge) overdraft limit. So in our case we have an overdraft limit of 100k, but the balance is only about 60k overdrawn. There are 2 reasons that we have done this:
(1) we don’t pay interest on the portion of the “mortgage” that we don’t use, we only pay it on the 60k,
(2) If we need that money in a hurry we don’t have to ask the bank for a new loan, it’s already “approved” and that money is available at mortgage rates (though please see post on revolving mortgages for why you need to be very careful of doing this).
The other thing that we do that goes against the “get rid of the mortgage fast” is that we are saving to invest alongside paying extra on the mortgage. This money will be used to buy shares to start with and this was a really big thing to get my head round. It’s all very well having no mortgage but do you have any money to live on as well. My parents are a good example of this. They have used $200k to buy a stake in our house. With our money, and our mortgage plus their 200k, we bought 1 big house. They have the money to get rid of at least a huge chunk of our mortgage but they would have nothing to live on (as they have very little income).
Something else I did remember if you are buying now, the exchange rate is very poor (2.5 @ time of writing*), and in some cases it may actually be better to leave some money in the UK, pay an NZ mortgage and then bring the cash over when the rate improves. I can’t remember the numbers, but we worked out that if the exchange rate £-$ went up to 2.85, it would be worth us leaving money in the UK for up to 2 years.
* Oh for the days of an exchance rate of 2.5! Its 2.2 today – and thats up a bit.
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
Like what Avalon has to say?
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Avalon’s Money Thread: Revolving Credit Mortgages.
These are sometimes called Line Of Credit (LOC) mortgages, and are very common here. They are most like the One Account in the UK, in that it’s a mortgage and current account rolled into one. Basically it’s a current account with a whopping great overdraft. The benefit is that if you get paid your salary directly into it, it can reduce the amount of interest you pay on the loan.
However there are some serious downsides especially if you are not too good at looking after your money. They are notorious for not getting paid off, as it’s all too easy to keep dipping into for buying cars, boats, shoes or coffee.
Also, because they are usually a few % more than fixed rate mortgages – you need to have a certain amount in there at all times to offset the higher interest rate. There’s actually a calculation you can do to work out how much of a balance you need to keep in.
I would say if you are thinking of a revolving credit account you do need to be very good with organizing your money, as it’s all too easy to end up with the OD limit never going down. So you never pay off that part of the mortgage. Some banks have these types of accounts where they do drop the limit each month so if you wanted one, but feel concerned look for that. Otherwise the way I deal with is:
I use Quicken to run my accounts at home. Doesn’t really matter how you do it but have some way of keeping track of your mortgage (don’t rely on the bank to tell you). In Quicken I have set up a “savings goal” and each month I move money into it. This is always the amount of money I “should” have paid on the mortgage if it was a normal one, minus the interest for that month. So for example: I should pay a total on $902 a month for a $100k mortgage at 9.05%. My interest for the month is around $300, so I pay $602 into the savings pot. When I have $5000 in there, I “move it back out” and ask the bank to reduce the overdraft limit by $5000. I have then paid off 5k. I know this may sound weird because the savings pot only exists in Quicken or on a spreadsheet, but it works.
You also really need a credit card. By putting as much on the credit card as possible, you keep the balance in the revolving credit account as high as possible for as long as possible. But always make sure you know exactly how much you can spend on the credit card without getting into trouble. For this to work well, and not get into debt you need to be able to pay off the CC each month in full. If you don’t think you can do that then it may not be a good idea to have this kind of mortgage. Do not use the CC for buying consumer items that you do not have the money for. That way lays ever-increasing mortgage debt. Maybe just have a very small limit on the credit card. You need the equivalent of 2 months spending as a minimum limit.
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
Like what Avalon has to say?
Click Here to buy Avalon's Guide or Click Here to buy the E-Book
NZ Herald article
Just in case any of our regular readers didn’t spot it, the NZ Herald wrote a story this morning.
The close of the article, with a comment from the IAA makes it all sound so simple.
“Are they [anyone writing about immigration] giving advice as defined by the act?” – well no that misses the point, the act says it’s ‘advice’ if it’s information given in a ‘systematic way’. Only the IAA just wont define what systematic means.
“get licensed” – yeah tried that, they refuse to license people who aren’t ‘immigration agents’ on account of we don’t have case files and customers that we’ve acted as an immigration agent for.
Anyone else spot the difference between an immigration agent and someone writing about immigration matters yet?
Of course, the NZH article itself might be considered ‘advice’.
[edited since I typo'd]
Avalon’s Money Thread: Can I get a decent affordable mortgage?
Filed under: Avalon's Money Thread, Interest Rates, Credit Cards & Mortgages in NZ
I’m a sick puppy; I think mortgages are really interesting once you understand how they work! The Anita Bell Mortgage book is really the best thing there is for explaining it all (Other than my book of course) and reading that will put you streets ahead when you have to go asking banks for shed loads of money to buy your own piece of beachfront New Zealand.
Firstly it’s always worth negotiating with the banks over your mortgage. The more you need to borrow the more clout you have, so don’t be shy. The worst that can happen is they say no and they may well say yes!
I got 0.5% off my variable rate on the Revolving Credit mortgage (that’s the ASB orbit account) and I also negotiated a refund on the monthly fee of $10 but forgot to negotiate a refund on ALL fees, so I do still have to pay $2.00 a time to set up automatic or bill payments I’m currently paying 9.05% instead of 9.55%, that’s on a mortgage of $100k. This is variable so goes up and down as the bank rate changes, but I stay 0.5% below the advertised ASB rate at all times.
I got 0.25% of the 2 year fixed rate so I’m paying 7.42% instead of 7.67% that’s on $165K.
Note: Current rates are 6.4% on the variable rate and 5.42% on the fixed rate mortgage. As discussed before here, we have also reduced the level of the mortgage by over $120,000 by using the tricks we learned.
I also got an agreement to refund all fees payable on my parents and brothers NZ accounts, up to $20 a month on each account.
AND – I got my first year Credit card fees removed, as well as the fee for joining the Credit card reward program. All in all, over the first two years, it is saving quite a packet.
A lot of what reductions you can get depends on the numbers – $265k mortgage is quite high. But my top tip, even if you aren’t looking at anywhere near that much is: shop around and TALK to the mortgage managers. I had 6-7 meetings with the guy at ASB; asking loads of questions about how things work in NZ. I also knew what I wanted to do to save money because I have read Anita Bells books on the subject a few times I built up quite a relationship with the guy before we ever signed on the line!
If anyone is patronising, or doesn’t give you the time of day, walk and go to the next bank or even another branch of the same bank. With ANZ I never got further than a first meeting with for this reason, that and they will give a measly 0.1% discount on the rate and charge you for it! Westpac nearly got my banking business, except when I was passed on to the “personal Relationship manager” and he was utterly obnoxious! Patronising and arrogant and he spoke to me as if I was 12 years old with a piggy bank! Bear in mind at this point I was well on the way to getting my finances sorted, had budgeted till I was blue in the face and could tell exactly what I had in the bank to the cent. I was not a happy bunny.
One thing I would suggest is ask every bank for quotes, and ask then them all to negotiate. I rapidly took two banks off my list because they wouldn’t move on rates (ANZ and HSBC). You will rapidly get to know what the deal is and get a feel for the best way to structure the mortgage.
The main options for mortgages are:
Fixed Rate Mortgages (fixed for 6 months up to 5 years – some now for up to 10 years)
Flexible rate Mortgages (your bog-standard old fashioned normal type mortgage)
Revolving credit accounts. (See below)
Be aware that you can split your mortgage into chunks, fixing some for different lengths of time, having some on a normal flexible mortgage, or some on a “Revolving Credit” (See next note). This is something I found really bizarre, because we just don’t have this in the UK. But to be honest I really like it. I just split mine into 2, but I’m due to look at it again in July07 and I’m thinking of doing a three way split: some on Revolving, a 1yr fixed rate, and a 2 yr fixed rate. It means you have a bit more flexibility to work with interest rate changes, and by splitting the mortgage up you can pay off your mortgage faster by making the overall interest rate lower.
QUOTE: Paying fortnightly instead of monthly is a very smart way to reduce mortgage costs.
Too right! We don’t do this because of the way we have ours set up it actually doesn’t give us an advantage. With a revolving mortgage often at a higher interest rate, you need to keep all your pennies in that account as long as possible. If you don’t have one of them, fortnightly is better.
If you use the “fine tune your loan” calculator on Westpac It will show you exactly how much money you can save between a monthly mortgage and splitting the amount in half and paying that fortnightly. Plug in the numbers for a monthly mortgage and hit calculate. That tells you the monthly payments and how much interest you pay overall. Under “Change payment frequency” – click option [a] (half monthly amount paid fortnightly) and hit recalculate. It then tells in nice friendly red letters just how much you save overall and how much time you just knocked off your mortgage. If that doesn’t make Mortgages interesting – nothing will.
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Avalon’s Money Thread: Banks and Bank Charges.
I have to make clear at the outset that I do not accept that bank charges are fair at all. I know all the reasons: how can I possibly expect the bank to work for free; they aren’t a charity etc, but banks make enough money out of us as it is and they don’t need to make any more. You don’t pay Whitcoulls $5 a month for the privilege of being able to go in and buy a book – so why should you pay the banks to hold on to your money. They make money by investing your savings, or charging you higher rates of interest than they pay, when they lend you money.
I utterly object to being charged to spend my money. I don’t care what they charge or why they do it, it’s not their money, its mine! It’s a principle thing and at the end of the day no amount of justification for charges actually diminishes my principles.
Bank fees in New Zealand are ludicrous and applied for the most spurious of reasons. ASB will charge you for having to ask their permission to spend your money! (The netcode release fee is a charge applied if you wish to spend over $500 over the Internet. This is for “security”. (Theirs not ours by the way – and yes – having a hubby who works in IT Security – I do indeed get the inside track on just how much we are being expolited by the banks on this issue). Apparently the banks got stung by fraud and so introduced net code. OK we all need security but I have never had to ask permission to spend my money, not even when I was 5. As it’s for their benefit though, why do I have to pay? The online spending limit used to be $2500, but due to a phishing attack I now cannot spend over $500 via the Internet without permission.
As others have said, you can get round this. Everything in the New Zealand banking system seems to be negotiable, especially once you have a mortgage or an account with $50k in. There’s nothing to stop you asking your current bank to match the best offer you can get elsewhere, we did this with our mortgage.
Note: Nogotiating with the banks is a lot tougher right at the moment, but as with everything – once the “resession” is over – the banks will come round and be more ameniable.
You can wangle your way round fees, especially service fees such as getting bank cheques and moving large sums of money for bills etc if you get a good “Personal Relationship Manager”. If you cannot do this, careful use of the system can minimise fees even if you can’t stop them.
Firstly be aware that getting small amounts of cash from an ATM is EXPENSIVE. You can get charged upto 50c each time. So when you get cash, get amounts that make it worth it. It always cheaper to get cash back at the supermarket paying usually only 20c. Never get cash from another bank ATM on top of the 50c charge, you get another 50c charge and it really adds up. (Do that 7 times – that’s a cappuccino ) Decide how you handle cash, its different for everyone, but we now use cash much more than we did in the UK, where we thought nothing of using switch (eftpos) for sums as small as £5, now we have a minimum we allow of $25.
(Currently becuase we have a Mortgage account – we dont actually get charged anything for taking cash out – it’s included in our monthly “base fee” which is now non-negotiable!)
It is worth being aware that fee free banking is finally coming to NZ. It’s been here a while with the proviso that you keep minimum balances, often $3k-5k. Now some of the banks are offering no transaction fees on their current accounts. In some cases you can get no monthly base fee by opting out of being sent paper statements. I’m not so keen on that idea, but that’s because for me the statement arriving tells me its time to balance my accounts. You have always been able to negotiate your fees here, but it has tended to rely on having a lot of business with the bank (savings or mortgage or business accounts), but this change means the fee free banking is open to more people not just those of us with a fair amount of money tied up with the bank.
Current ASB charges:
Streamline account:
$3 a month base fee (waived if you have “Statement Stopper”)
$1 a month for a netcode token
25c each day you use Netcode
$2 to set up an automatic payment or bill payee.
Fastcheque is now free.
Their credit cards cost from $12 – $40 each every 6 months, and their credit card reward program costs $10 each for 6 months. Why they shoudl charge you to join the rewards program is beyond me – anything for a fast buck I guess!
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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