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The stepping stone to your dream home

When you're buying your first home, you want a place to live you can call your own. Sometimes that might not be your dream home, but it could be a "stepping stone" to something you've always wanted.

At My Mortgage, we often talk about making a plan that will be best for you in the long run, and putting you in the best position we can long term. Part of that is to make a plan for you for the next 2-5 years, ask you about your financial goals and what you'd like to achieve over that time. 

It's super important to us.

Take Jake and Laura for example. They are 23, and earn $50K and $43K respectively. They have saved hard over the past 3 years and have savings of $49K along with Kiwisaver of $14K, and they are also eligible for the Home Start Grant of $7K combined. Their total deposit is $70K.

They want to find some land and build a small house in the Waikato, but they are struggling to meet the total project cost of a new build within the Home Start Grant cap of $450K. After some lengthy discussions about the best way forward, we suggested a 5 year plan to achieve their goal.

Year 1:

Looking at spending a little bit less now, will allow you to build up savings over the next year of say $10K. If you bought for $350K, and added a little bit of value to sell for $370K, that’s adding another $30K to your current deposit. Plus you’re taking advantage now of your Home Start Grants being under the purchasing cap of $400K. It also allows you some breathing space – if interest rates increase you are not overstretched and can still do your overseas trip (and even maybe AirBnB your place in the meantime!)

​Year 2 & 3:

As above, if you can use a combination of saving with a lower cost of living, as well as grow some equity in your first property, in year two or three you are in a position to sell and realise that gain to say $100K total (your original $70K plus $30K in equity and savings). You then have 20% of the $500K value and a lot more flexibility when buying a section and building. The banks will be a lot more lenient and you can save money by not needing to have a House and land package or a turnkey contract. You can spend the year looking at options so you can hit the ground running when it comes time to build. $400K borrowing at 80% is more like $475 / week rather than the $500 / week as above.

​Year 4 & 5:

You can then pay down your home loan and continue to build some equity by landscaping your Stage 1 home and continuing to save. At the end of Year 5 the goal would be to have realised another gain of $40K so you can build Stage 2 for another $200K and get to a finished home with good equity and a final home loan of a maximum of $600K (or less).

This allowed Jake and Laura to still keep their dream of building a home, but by putting a clear plan in place, and getting them on the property ladder, now, we have created a better long term outcome.

Adam and Claire are happy to sit down and discuss your situation, and make a tailored plan for you. 

Putting this plan in place now will make a massive difference to achieving your financial goals long term.

Your first home might be your forever home - or it could be a key stepping stone in your long term plan. Let us help make it a reality for you!


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