For the first time since mid 1986, when my ex wife and I bought our first house, I am no longer listed on any land title as the owner of a residential property. I also do not have a mortgage.
Fortunately Karen has owned the house we live in since before we met so I still sleep with a roof over my head. It was actually an attempt after 25 years together to place both our houses (mine has been rented out since I moved to my current town of residence in September 1997) that lead to this situation.
Unfortunately new lending rules bought in by the government last December to curb 3rd tier lenders also effected mortgage borrowers. The bank would only account for 55% of the rent as income and had to set "minimum" living expenses based on big city costs. According to the bank our $600 per fortnight surplus after expenses, including a higher level of mortgage interest than standard, was on paper a $200 a fortnight deficit (they had to count savings and investments like superannuation contributions as living costs) so they declined to refinance with both properties in both names.
Over the last few years the Kiwi government has done everything they can to discourage private landlords. First they removed the ability to charge depreciation as an annual business expense. Then they removed the ability to recoup annual losses on rental properties (there is always a paper loss) from other taxable income. Finally they have just begun a four year process to eliminate the ability to charge mortgage interest on rental properties as a business expense (any other business can still charge debt interest as an expense). The time was right to sell, become totally debt free, put a lump sum into the superannuation account and take another overseas holiday.
So no mortgage, no credit card debt, no personal or car loans and a lot of additional money into the savings accounts each fortnight to upgrade the car every 3 years and holiday in the US every 12-15 months.
Should have thought of this 5 years ago.
Fortunately Karen has owned the house we live in since before we met so I still sleep with a roof over my head. It was actually an attempt after 25 years together to place both our houses (mine has been rented out since I moved to my current town of residence in September 1997) that lead to this situation.
Unfortunately new lending rules bought in by the government last December to curb 3rd tier lenders also effected mortgage borrowers. The bank would only account for 55% of the rent as income and had to set "minimum" living expenses based on big city costs. According to the bank our $600 per fortnight surplus after expenses, including a higher level of mortgage interest than standard, was on paper a $200 a fortnight deficit (they had to count savings and investments like superannuation contributions as living costs) so they declined to refinance with both properties in both names.
Over the last few years the Kiwi government has done everything they can to discourage private landlords. First they removed the ability to charge depreciation as an annual business expense. Then they removed the ability to recoup annual losses on rental properties (there is always a paper loss) from other taxable income. Finally they have just begun a four year process to eliminate the ability to charge mortgage interest on rental properties as a business expense (any other business can still charge debt interest as an expense). The time was right to sell, become totally debt free, put a lump sum into the superannuation account and take another overseas holiday.
So no mortgage, no credit card debt, no personal or car loans and a lot of additional money into the savings accounts each fortnight to upgrade the car every 3 years and holiday in the US every 12-15 months.
Should have thought of this 5 years ago.
