Alan Clarke: Mortgage interest? No thanks

Save your money - be smart and you can buy a house.

The key is to not borrow even one dollar until you have really worked on your cash flow, your career and looked at all the options open to you. Be smarter. Don't accept the status quo. THE Reserve Bank's decision to continue the minimum 20 per cent deposit on home loans could see some first-home buyers give up on the idea of ever owning a house.

But they shouldn't!

There is always a way but maybe not if you accept the traditional status quo routes to home ownership.

STATUS QUO ACCEPTER

But first things first. Cash flow is king from age 17 to 97.

You can't eat without cash flow.

You can't put a roof over your head without cash flow.

You certainly can't pay off a substantial mortgage without good cash flow.

SECURE THE CASH FLOW FIRST

In other words, your income and career.

Are you doing all you can to do the best you can, career-wise?

Are you prepared to move house, town or even country to do so?

Are you prepared to go back to university, night school or whatever it takes to do the best you can?

Have you looked into getting your own business instead of a house?

A COMMON INCOME KILLER

I often see situations where people choose to live near their parents or their favourite sports/hobbies, even if it limits their career opportunities.

Often these are the very people who complain how hard it is to get a first home.

STATUS QUO ACCEPTER

A close relative of mine told me a big mortgage was fine, that is what all young people do.

You guessed it -- he is 30, has two children and another on the way and bought a four-bedroom, two-bathroom home with a big mortgage -- a classic SQA.

Worse, he has undersold himself in his chosen career so is likely to struggle, becoming mortgage-free at 65 when he could have done so at 45.

BECOME A 'NO WAY, SQA'

To get that first home, you may need to say to yourself loud and clear and often:

No way, I'm not going to be an SQA.

I am going to pursue the best career opportunities I can find.

Even if it means moving towns, or even countries.

I am not going to insist on four bedrooms and two bathrooms.

I am prepared to live in a smaller space if it means I can avoid paying tens of thousands in mortgage interest.

I am not going to accept council building restrictions if they stop me from getting ahead.

I am not going to make the banks rich at my expense.

I am going to seek a better way even it it is unconventional

BUT WE DID IT THAT WAY

Plenty of older people will say: "What's your problem? We scrimped and saved to get into our first house and we eventually got there financially."

Certainly, it is generally agreed that some self-help and personal determination leading to success is highly desirable.

But houses now cost eight to 10 times the average wage, not four times as in the past.

The key is to not borrow even one dollar until you have really worked on your cash flow, your career and looked at all the options open to you.

Be smarter. Don't accept the status quo just because that's what everyone else does.

THERE ARE MANY SOLUTIONS

Eliminate rent -- live in mum and dad's garage.

 Find a job which has free accommodation -- night manager at a motel, or sharemilker, for example.

Get a job overseas in the Aussie Outback, or Middle East that offers free accommodation.

THEN SAVE SAVE SAVE AND BUY A SECTION

Put a minor dwelling on it.

Or stage one of your dream home -- maybe the garage.

Or get a converted shipping container -- they are cheap and comfortable -- and some are pretty smart.

I will never understand why they did not use hundreds of them as temporary accommodation in Christchurch.

The local council will no doubt try to stop you building anything that is not a dwelling proper to prevent slums (I agree) but don't let that stop you doing something temporary to save mortgage interest.

Remember your prize -- $100,000-$200,000 less mortgage interest to pay.

That's a helluva desirable prize!

Alan Clarke is a financial and retirement adviser and author. His second book, The Great NZ Work, Money & Retirement Puzzle, is available at www.acfs.co.nz.

Alan is an independent authorised financial adviser (AFA) FSP26532; his disclosure statement is available on request and free of charge.