When considering whether to rent or buy a property the most important consideration is AFFORDABILITY.
In spite of recent price rises in our area, home affordability in Hawke’s Bay is amongst the best in the country. This is helped by the low cost of borrowing at present.
The latest data (from interest.co.nz) shows that rent consumes 26.5% of a typical household take-home pay to afford the median rent for a three-bedroom home in Hawkes Bay.
Instead it takes 24.6% to service the mortgage and related household costs to buy a home in the lower quartile price range.
Assuming you can get the deposit together, this means you are better off buying a home than renting (by at least 1.9%).
When you save 20% of your income, it will typically take three years to save the 20% deposit, which is ordinarily required by most bank lenders.
If you are buying your first home, you may qualify for a Home Start grant. If you have been contributing to KiwiSaver for at least 3 years, you may also be able to withdraw your KiwiSaver savings (including tax credits). In some circumstances, if you’ve owned a home before you may still be eligible for this assistance.
Be aware when you’re using this benefits there is a “house price cap”. In Hawke’s Bay this maximum price is currently $400,000.
The best place to start planning for buying a home is to contact a reputable MORTGAGE BROKER. It’s important to do your numbers carefully. You don’t want to move into a home then find yourselves under financial pressure. We can connect you with a reputable advisor who can assist you with this.
Here are some questions to consider when you’re weighing up the affordability of buying a home:
How much deposit do you have? The mortgage lender expects you to prove your savings record and show that you have saved some money as a deposit toward your home.
Can you afford the repayments now?The lender will look at your employment record, your income and how well you are managing your expenses. Get your credit card and hire purchase under control.
Can you afford repayments on one wage?OK, if pregnancy is not on the cards, this may not be relevant.
Can you still afford the repayments if interest rates rise by 2%?While interest rates are low now, they could rise in the years ahead so allow for a 2% increase as a contingency. If you can’t afford repayments at the higher level, then don’t buy.
If you CAN afford to buy, then DO IT. Don’t wait for the ‘right time’. Start enjoying the benefits of home ownership as soon as possible! The benefits of home ownership include long term capital gain; feeling safe and secure; building up your asset base; and getting on the path to prosperity.
Finally, start out with a modest home, then trade up when you’re ready. Always keep your home repayments at a (conservative) affordable level.
For other great advice about buying your home call Cox Partners Estate Agents on (06) 835 4321 for our FREE booklet, “Buying Your Home”.