OK, so I'm new to this site but am loving it. We are a 2 income family in NZ ( so some mortgage rules are different - interest rates are currently 5.75%), making 60K in the hand. We have no debts other than our mortgage. We have been living under ours means, but I realise we can do a lot better. My goal is to save 40% of our money - we are currently saving about 30%.
We own our home with a mortgage of 90K, and it's worth about 230K. I am on contract based work and have 2 years left on my contract. Because it's based on a funding model, I don't have any control over it - even if I work amazingly, if we don't get the funding from the government, I don't have a job, and this is a source of concern for me, however I like my work and it's always been fine so far. I work part time (9-3) which I would like to keep doing as this is great with the kids in school and not having to pay after school care.
My query is wether we should pay off the mortgage first, or borrow equity to invest in a rental. We had a major issue earlier in the year - we purchased a bigger house, and my husband had a car accident and I freaked out over having two mortgages to pay and panicked about what would happen if we couldn't get renters etc - so we sold the new house immediately and lost money - but I could sleep again.
So I'm obviously very risk and debt adverse.
However, I do see property as a great tool and investment and I think we should pursue it. My other concern is that house prices will rise here and then it will be harder for us to purchase a rental and we could be missing out on opportunities just because I'm scared to act now. The other thing is I feel we've really outgrown our house ( and I know that's very anti mustaschian but it is a tiny house and part of me is wanting to buy a slightly bigger (but cheap) house and rent out our current home).
So I'm not sure what to do.
The safest way in my mind is to pay off our mortgage ( we're on revolving credit and could realistically pay it off in 2-3 years), then purchase either a rental or a slightly bigger house for ourselves.
CONS - house prices could rise making it harder to purchase another place, means we have to make do in our current house a bit longer.
OR
Buy a rental ( or rent ours out), buy a realistically priced house for us now, and pay that mortgage off quickly ( so say total mortgage of 300K which even if we didn't have any rental income we could cover with our wages). The mortgage for the rental will be Interest only until we pay off our 'home' mortgage, then we could reduce the debt on the rental
Cons - more debt, more potential for trouble if we lose jobs, rent etc. Less of a safety net.
PROS - would have a rental now and beat any house rises. Would have a roomier place for us to live (note our current house is 90M2, so I'm not talking a mansion here).
Having written this out, it now seems to me we should just pay off our mortgage first. But I'm worried we could be missing out on investment opportunities and make our money work for us using the home equity.
Would really appreciate any views on this, thanks.