How to buy a house for less than half its price-  Two

Accommodation was easy to get those days but moving house was a hassle. Now I had something of my own. I had a place to stay. A place where I could not be chucked out at the whim of someone else.

This was my own house.

I bought the house for $17 000. Today, this is peanuts, but it was not at the time. The house had four bedrooms, two bathrooms with the main en-suite, a separate lounge and dining and a bar complete with stools and fridge. I paid an extra $500 for the bar and fridge.

I paid a 10 percent deposit of $1 700 and was thus granted a mortgage loan of $15 300 repayable in 25 years at an interest rate of 13.25 percent. This came to $176.12 a month but with $8.88 as the monthly insurance premium, my repayment came to $185 a month.

This was quite reasonable for me although slightly more than what I had been paying for the railway house. But now I was paying for something that was my own. My money was not going down the drain as it had been while I was renting.

My building society had a policy of sending out statements to its clients every six months, at the end of March and September. At first, I did not pay any attention to these statements because I had too much on my mind, like settling the transfer fees, and getting additional furniture for the house. It looked so empty with only three persons (my wife, I and our child) who all used one bedroom. So we had to fill the house somehow.

It was in April 1986 that I began to query the whole concept of a 25-year mortgage. I was now about to complete my third year but the mortgage had hardly been reduced.

I began to ask myself why was this so when, for example, people buying cars only had three years to pay.

I asked myself: “Why was the building society giving me 25 years to pay $15 300 yet a garage would want me to pay that same amount in three years if I bought a car?”

I took out my calculator and multiplied $185 by 12 months and I found that I was paying $2 220 a year. That was not much but when I multiplied that by 25, I was shocked by the amount, $55 500.

I was really shocked because I was paying $40 200 in interest alone for the house. I was therefore paying 3.6 times the amount I had borrowed.

Now that I know what to do, I should have got a clue when I signed the papers for the grant of my loan. The house was insured for $60 300, some $45 000 more than I had borrowed.

To be continued next week

Continued next page

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