OPINION:

As we say goodbye to 2023 and welcome in 2024, it’s a good time to catch up on the very best of the Herald columnists we enjoyed reading over the last 12 months. From
politics to sport, from business to entertainment and lifestyle, these are the voices and views our audience loved the most. Today it’s five of the top columns from Mary Holm.

Q. I Hope you can help me with some advice. I actually feel a little embarrassed, as I’ve made some bad decisions financially.

I’m a single 58-year-old female (single mum but my daughter is now 21). I have a $600,000 mortgage, with about another $600,000 equity in the property. When I applied for the mortgage, I had to choose between KiwiSaver or mortgage, and obviously I decided on the mortgage.

Knowing that there will be a fairly good chance I won’t ever be mortgage-free, should I sell my home, save the equity and rent? I am healthy, still working fulltime with a base salary of $120,000.

My daughter wants to pay the mortgage with me (go on the title as she has some savings), but I’m not sure I want her to do that. I feel like she is better off getting herself a small investment property.

A. If everyone who made a bad financial decision was embarrassed, we would all be walking around red-faced. Besides, there were no alarm bells jangling as I read your letter.

On the KiwiSaver versus mortgage choice, I recommend trying to do both.

Ideally, put in 3 per cent of your pay if you are an employee, so you get the employer and government contributions. If you’re not an employee, or if you really can’t afford 3 per cent plus mortgage payments, go on a savings suspension but put in $87 a month, paid directly to your provider. This will get you the maximum government contribution of $521 a year.

Why do this? Read more >

Q. My husband and I bought brand-new units as rental properties in 2017, using equity in our house and $0 actual cash. The rent covered the mortgage interest, but repairs were extra and it became a compulsory savings scheme as we had to put in extra money to cover the principal (the bank allowed interest-only for the first two years, but not after).

We had no free money, stopped being able to take our kids on holidays, and it sucked the fun out of life (and we had really good tenants).

When we sold them during the recent peak in the summer of 2021/2022, we barely covered costs. We got back the money we put in and that was it. After paying real estate fees etc, the gain on the total purchase price was a whopping 1 per cent.

I know property really is a long-term investment, but in hindsight selling was the best thing we did. Property destroyed our quality of life, and if we still owned them now we would likely be bankrupt.

A. People can have hugely varying experiences with rental property in different locations, with different luck on tenants, different levels of maintenance and so on.

Every property or share investment should be over 10 years or more. Judging performance over a shorter period is unfair. Read more >

Q. A few years ago we took out a reverse mortgage and bought a motorhome, which we have used a lot. Recently we have considered moving to a retirement village, but find that the mortgage has grown significantly and eaten into our equity such that our choices are somewhat limited.

I would suspect that most seniors who reverse mortgage their homes will some day want to downsize or move to a retirement village, despite the banks’ publicity to enjoy staying in their own home.

We needed to realise that these mortgages can severely reduce or even eliminate the choices available.

A. Reverse mortgages work well in some circumstances. If you own your home with a tiny or no mortgage, and you have spent all your savings and would like more money to fund your retirement, you can borrow against the value of the home.

Unlike an ordinary mortgage, you make no payments of principal or interest until you sell your house or die. The loan is then repaid with some of the proceeds from the house sale.

But it’s really important to understand how fast a loan can grow, with compounding interest, over the years. Read more >

Q. I am an 80-year-old woman living in a mortgage-free apartment in Auckland. My only income is from NZ Superannuation. Body corporate fees and council rates are my main expenses, approximately $9000 a year. I need to set up a reverse mortgage Asap. Would it be wiser to borrow a lump sum, say $10,000 initially as I have no emergency funds, or a regular monthly sum?

A. A reverse mortgage could work well for you.

At your age it’s highly unlikely your loan will compound for more than 20 years — sorry! Also, you’re not looking to borrow heaps.

But first, let’s look at another option: rates postponement. Read more >

Q. I work as an accountant for a KiwiSaver provider. The system to get KiwiSaver contributions and deductions invested by your provider is slow, as the money is transferred via the IRD. Here’s some advice.

A. Employees’ KiwiSaver money does, indeed, take a long time to wend its way into KiwiSaver funds.

So it’s a great idea to ask your employer to send extra contributions directly to your provider. If your employer can’t cope with that, you can set up an automatic transfer to your provider out of your bank account after your pay comes in. Read more >

Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.