Property Investment
3 min read
Author: Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
My podcast co-host (Ed) just got married last week.
Now if you care about that kind of stuff, thereās a photo below.
If donāt know (or care) who Ed is ā¦ keep reading anyway.
Because what comes after marriage? Kids.
And one of the main questions property investors ask me is:
āIf I have a kid, will that stop me getting a mortgage?ā
Letās find out.
Kids cost money. And the banks know that.
So letās say there are two couples. Both earn the same amount of money.
But couple #1 has 5 kids. Couple #2 has 1.
If everything else stays the same, the couple with 1 kid will be able to take out a bigger mortgage than the couple with 5 kids.
Because theyāll have more money available to go towards the mortgage.
Depending on the bank youāre with, each child costs about $300 a month in the bankās eyes. So thatās about $78,000 less of a mortgage if youāre buying an investment property.
Thatās not to take the shine off having kids! Or to say ādonāt have them.ā
Itās just to give you the numbers around how it impacts your mortgage. And this is one of the reasons Iām seeing more people decide to invest in property before they start a family.
But thatās just the start. Kids will impact your life in other ways too.
Often couples take a drop in income when they go on maternity leave. Thatās because one partner stops working for a while.
And only the first 6 months are paid. The most you get from the government is $789 a week. And thatās before tax! So:
So that often means that you take an income hit. And the bank will look at that when you apply for a mortgage.
Itās not impossible to get a mortgage while one partner is on parental leave.
For instance, if you have enough savings to cover a temporary drop in income, you can still get your mortgage approved.
But, it is harder. As there is less income available to pass the stress tests your bank puts your mortgage application through.
Childcare in NZ is expensive. So if you head back to work full-time it can easily cost $300 - $500 a week.
The bank will count this as an expense when seeing if you can afford a mortgage.
Thatās because for under 3ās daycare can cost $60ā$100 per day depending on the centre and location
What about after your child turns 3?
Youāve probably heard people say that you can get 20 hours of childcare for free.
But while ā20 Hours Freeā sounds great ā¦ in practice, itās a partial subsidy.
For one Lollipopās daycare centre I looked at, it costs $318 per week for under 3s.
For over 3s itās $226 per week. ($92 less). But that includes the subsidy.
Even if youāre spending $200 a week on daycare, that could mean you borrow up to $225k less for an investment property.
Thatās if income is the main thing holding your mortgage application back.
This isnāt to put you off either having kids (or investing).
Itās that if you get married (or have kids) it has a real impact on your household budget.
And if you know the costs, you can make the right plan for you. So you arenāt surprised if
And if youāre thinking about having kids, check out this calculator I built for you.
Answer a few questions, and it will give you a sense of how much your kid might cost over the first few years:
Hereās the link to use the āhow much does a kid cost?ā calculator.
Andrew
PS ā Here's that wedding photo I promised.
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
This article is for your general information. Itās not financial advice. See here for details about ourĀ Financial Advice Provider Disclosure.Ā So Opes isnāt telling you what to do with your own money.Ā
Weāve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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