Mortgage options

Press, 12 July 1988, Page 33

Mortgage options

Two home buyers purchase a house for $BO,OOO. One borrows $55,000 for 25 years; the other $45,000, also for 25 years. Their weekly repayments are little different. How can this be?

It can easily be explained by one purchaser taking out an interest-only mortgage and the other repaying both interest and principle, says Mr Kent Prier, a national council-

lor for the Real Estate Institute of New Zealand. He asked a Christchurch lending institution to check out some figures to explain the differences. One couple borrows $45,000 with an interest and principle type mortgage for an $BO,OOO house. If their net income was $20,000 per year, they would have $384 net per week. Repayments would be $lB4 per week, leaving $2OO for other living ex-

penses, which the lending institution would insist on. For a single person, $l5O per week would be considered sufficient for living expenses.

With an interest-only mortgage, the couple could borrow $55,000 for 25 years. This would cost them $177 per week. They would have the option of repaying the principle early if they wished, without penalty.