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The scribble graph

This scribble is going to be familiar for a lot of people reading this... 

It may be fairly crude but it sums up why it feels so tough getting in to your first home but also just how much that hard work pays off over time. The basic premise is that when you first buy a home, the gap between your mortgage and the value of your home is quite narrow and that represents your equity. Over time you chip away at paying off the mortgage and house prices inflate which makes that gap grow.  

It makes you feel a bit better off.  For most of us that might be where our parents are and we want to be further along that scale but it's simply a case of getting on the bus and going for the ride! When you throw your personal income in there which generally increases over time as your skills and experience grow, or rental income which also increases with inflation, you really start to see how the gap widens over time and that's how your wealth increases.

A bit of work can help to extend that gap even quicker. 

  • Put in some hard work improving your property and the house value line takes a jump up. 
  • Increase your mortgage payments or make some lump sums and that line drops down, plus you get the advantage of less interest cost in the future so it starts to accelerate downward even quicker. 

So it might seem tough at the start, or as you sit there on a single income with a young family just getting by and making mortgage payments but as you can see, it's time that is your friend in this situation and if you keep at it you'll achieve a great deal of growth in your personal wealth over time. 

Adam is not renowned for this art but hopefully that little scribble helps to illustrate the point that wherever you are on this graph (or yet to get on it) it's all worth it to build that security for your family and even to build wealth. If you'd like to discuss how you can open up that gap even quicker, then simply drop us an email to office@mymortgage.co.nz or click the "contact us" link at the top right of this page.

Adam, Claire and the My Mortgage Team