Aucklanders' options for paying their huge rates bills
Aucklanders' rates pain was confirmed on Wednesday morning when homeowners could go onto Auckland Council's website and check how much their rates have risen by this year.
The average rate rise was $214, but many households faced much bigger hikes to fund infrastructure building in the city.
About 9000 households faced rate rises of more than $1000.
READ MORE: It's time for Aucklanders to harden up
The average 9.9 per cent resident rates rise leaves householders, particularly those on lower incomes or NZ Super , needing to tighten their belts, or use one of a limited number of mechanisms for deferring, financing, or rebating their rates.
Here are the options other than cutting back on spending, finding ways to earn more, or selling possessions to help ease the new rates burden:
SPREADING THE PAYMENTS
You can pay your rates in one big lump, or spread the payments in four equal chunks throughout the year, though if you can't afford to pay in one go, you pay more.
Those who pay in one go get 1.1 per cent of their bill knocked off.
That may not sound much, but if your bill is $3000, that's $33.
Pay late, and you could make the council's already massive rates rise twice as bad. Auckland Council charges a late payment penalty of 10 per cent of the rates that should have been paid.
Nationwide councils charge GST on late payment penalties. This issue is being tested in court.
Auckland Council has a rates deferment scheme which allows people with equity in their homes to defer the payment of their rates for years.
The only cost (apart from filling in the paperwork) is an annual interest rate charge based on the council's borrowing costs. It is currently 3.5 per cent, but it can rise or fall each year.
There is no administration fee.
The debt to the council compounds until it is paid back. That's probably not such a huge problem as long as house prices are rising, and council borrowing rates stay reasonable.
Auckland Council's policy says rates postponement is there for people who "want" to postpone their rates, have owned their home for over two years. Ratepayers can postpone up to 80 per cent of their available equity.
There is no hard requirement for people to be in financial hardship as there is with some other councils like Wellington City Council.
GETTING A RATES REBATE
The rates rebate scheme is a Government scheme designed to help lower income families, including the elderly relying on NZ Super, to pay their rates.
Depending on your income, the Government pays part of your rates bill. But it is notkeeping up with Auckland's rates rise.
On 1 July 2015 the maximum rebate increased by just $5 or 2.33 per cent of the average rise.
There's a calculator on the Department of Internal Affairs website where you can see if you are deemed poor enough to qualify.
Auckland's rates rises means that for some people, the amount of rates they can have rebated has jumped.
A married couple getting by on NZ Super alone, which pays them $33,935.20 a year before tax, and a rates bill of $2000 would get a rates rebate of $40.67.
But, if their rates bill was to rise by $214 to $2214, the rebate available would rise to $183.33.
The uptake of the scheme is lower than could be expected. In the year to the end of June 2014, the Department of Internal Affairs expected to pay out $55 million in rebates. Instead, it did just $50m.
Despite rates rises around the country, the amount it paid out was $3m lower than the previous year when it had expected to pay out $60m.
GET A REVERSE MORTGAGE
Some homeowners of advancing age, who refuse to sell up and move somewhere cheaper, get a reverse mortgage from the likes of Heartland Bank.
These are loans secured against their property, which are only repayable when they choose to sell up, or their estate does.
But the loans are not cheap.
The interest rate is 8.1 per cent. That is a floating rate, so homeowners should expect it to rise when interest rates start to rise again.
The interest is charged each year on the amount owing, so the balance will compound year after year making it an expensive form of debt.
The application fee is just short of $900, and there will be lawyers' fees too.
Borrowers can then borrow more each year, though Heartland's minimum for a no-fuss extra drawdown is $5000, which is more than is needed to pay most people's rates.
Fortunately, many homeowners in Auckland are equity rich thanks to the limitation on supply of new homes, for which many hold the council at least partly responsible.
- The interest rate charged under the council's rates deferment scheme has been corrected to 3.5 per cent