Buy lowest value house you are happy to live in

BUYING A house is the most important financial decision  most people  make.
The financial consequences of  a mortgage can have  a favourable or disastrous effect on your future prosperity, depending on how well your mortgage is managed.
Money borrowed to  buy a house  you live in yourself is referred to as bad debt - as opposed to good debt which is money borrowed to purchase a property or business that makes an investment return.
Bad debt should always be kept to a minimum and repaid as quickly as possible.
The starting point with managing your mortgage is to buy a house  well within your budget. Save a good deposit and buy the lowest value house you feel comfortable living in. Interest rates on mortgages can vary  over time and this is a trap when interest rates are low.
A mortgage that is affordable at a low rate of interest may be beyond your means when rates rise. It pays to divide your mortgage into several chunks over different terms, with some on a floating rate
and  some fixed for different periods. This helps to minimise the risk of paying too much interest over the term of the mortgage or paying high penalties if you need to break your mortgage.
If you are disciplined with your money, it can be helpful to have a line of credit that is only used in case of emergency.
Try  paying your mortgage off  quickly by focusing on the chunks  that are floating  or fixed for a short term.
 
Liz Koh is a financial adviser, based in Paraparaumu. Her disclosure statement can be obtained free of charge by calling: 0800 273 847.  She can be contacted on email: liz.koh@moneymax.co.nz or view: www.moneymax.co.nz