For many people in New Zealand, the dream of buying a home is as Kiwi as jandals, fish ‘n’ chips and the All Blacks. But what are the real benefits of making the home-ownership dream a reality versus renting a property?
First of all, like any goal, buying a house does require hard work and commitment. You may need to make some sacrifices in order to save your deposit. Luckily, if you’re buying your first home, you may be eligible for some assistance with your deposit, using KiwiSaver, the HomeStart grant or a Welcome Home Loan.
It’s also important to remember that the costs of home ownership don’t end with your mortgage repayments. You’ll also need to factor in council rates, building insurance and maintenance. If the plumbing springs a leak, there’s no landlord to call – you’ll have to pay for the repair yourself! It’s important to prepare a budget that takes all of these things into account and check that your plans are realistic before you commit to buying.
You’ll also be a bit less flexible when it comes to changing your plans. If you decide to move to a different city, or even overseas, then you can’t just give notice and leave – you’ll have to consider what to do about your property. Of course, owning a home also gives you options in this situation. You could sell your home, freeing up money for the move, or perhaps you could rent it out and earn an income while you’re away?
And there are other benefits to home ownership. For most people, one of the most appealing things is the security and peace of mind that comes with knowing that the house you live in belongs to you. As long as you keep up with all of payments, you can stay in the home for as long as you like – there are no landlords to serve you notice because they’ve sold the property. You also won’t get stung by unexpected rent rises. If you choose a fixed-rate mortgage, your repayments will remain the same for the length of the term. Do bear in mind, though, that at the end of the fixed term (usually between one and five years) changes in the interest rate may mean a change of repayment amounts.
Because the property belongs to you, you’ll also enjoy the freedom to renovate your home to better suit your tastes and needs. DIY can be a lot of fun and very rewarding – just make sure you plan carefully and put a budget in place, ensure you obtain the correct building consents required by your local council, and make sure you hire a professional for technical jobs.
If you play your cards right, renovations may add value to your home, and that brings us to one of the most important home-ownership benefits of all: financial security. Although the real estate market can go up or down in the short term, over the longer term the price of real estate goes up. Just consider the average cost of houses in your neighbourhood ten or twenty years ago for proof of this. What’s more, as you pay off your mortgage, you are building equity in your home – as the mortgage goes down, the bank’s share of the property reduces while your share increases. Think of it as a savings scheme. Instead of making your landlord wealthier, you’re building your own wealth!