RNZ’s money correspondent Susan Edmunds answers your questions.
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Does it make any material difference to the interest you pay on a mortgage whether you pay extra money every fortnight as opposed to making the minimum repayments and then a lump sum before you refix? This year I’ve bought my first house with a two-year fixed interest rate. Because of the economic situation and to give myself some breathing space, I’m only paying the minimum fortnightly repayment. However, I’m saving $200 per fortnight with the aim of making a lump sum payment at the point I refix my mortgage in two years. I’m curious about which way is best to reduce interest paid over the life of the mortgage.
My initial thought here is that with ongoing higher repayments, you are reducing your balance more quickly, which means there is less owing to be charged interest on.
I wanted to test that theory, though, so I asked Jeremy Andrews, a mortgage adviser at Key Mortgages. He said it is generally better to either increase your regular repayments or make a lump sum payment every year. He said most banks will allow you to do that (up to a certain limit) without a penalty even within the period of fixed term.
He points out that it also means you are not paying tax on the interest you earn on the savings in the meantime.
“We usually encourage a structure or bank choice which allows extra repayments to be effectively noted as your own funds reducing the drawn balance of existing limit, rather than permanently committing these funds to reducing the maximum limit. That way if something unexpected in life happens and you need those funds back again and hence likely when it’d be hardest to get further funding approved too, you have access too that hard earned buffer.”
The only other point I would make is that personally I find it helpful to increase repayments rather than save up a lump sum to pay off just because it reduces the likelihood that other things will pop up and take that money.
If it is already gone on the mortgage, it is not accessible in the same way that it might be if it were sitting in your savings account.
Do I still qualify for NZ Super when I am NZ tax non-resident? My travels take me out of NZ for 183-plus days each year, but I don’t travel for more than six months each time.
Julia Bergman, general manager of international, disability and generational policy at the Ministry for Social Development, said one of the key eligibility criteria for the pension is that people need to be ordinarily resident in New Zealand when they apply.
You can also use residency in other countries with which New Zealand has a social security agreement – but not the UK – to qualify.
She said when the ministry determined whether someone was ordinarily resident, one of the things that was considered was where they paid tax.
Tax residency status is relevant but it is not the only thing that is considered. Other things include your intentions, your reasons for travelling, the length of time spent in each country on a continual basis, property ownership, the location of bank accounts, whether income was earned in other countries, whether you vote in other elections and your commitment to the countries.
“Ultimately, the decision is made on a case by case basis. If anyone has questions about their specific situation, we encourage them to contact us so we can discuss what they might be eligible for.
“People are generally not considered to be ordinarily resident in New Zealand, or the other countries mentioned, if they either leave for more than 26 weeks, or spend more time outside of these countries than inside.”
Like many questions you get I’m trying to clarify my individual situation when I turn 65 in June next year. Born 1962 in NZ. Worked 1978 to 1986 in NZ before I moved to Australia before returning to NZ in September 2022 to look after my elderly mother and also do some part time work. Her pension was reevaluated as I was living with her. I’m wondering if the same process currently remains today, I am eligible for the pension in June 2027 when I turn 65. I heard on the podcast you have to apply for it and what is a recommended time span beforehand to do this?
You can apply up to 12 weeks in advance. It is worth doing it a bit early because you can not get the pension backdated.
If you get the pension and live with someone who is not a partner or dependent child, you will get the single, sharing accommodation rate. That is $1911.14 a fortnight before tax, at the moment.
Your part-time work will not affect your entitlement but it is worth checking you are using the right tax code. Generally, you need to use a secondary tax code on whichever is your smaller income.
Why are women (and men) in a couple disadvantaged when receiving NZ Super? The single rate is higher than the couple rate divided by two. Having worked all my life (paid separately, taxed separately) then to be paid based on my relationship status seems absurd! Surely NZ Super should be a flat rate per retired person? Seems sexist and old-fashioned to me.
I know a lot of people do not like the prospect of their NZ Super being decided according to their relationship status. The same applies to most income supports, though. The system works on the basis that couples support each other – people who are unemployed, for example, cannot access JobSeeker payments even when their partner is only earning around the median income.
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