Renting or owning: Weighing up costs
On the fourth day of Money Week, Jubilee budget advisory services manager Simon Tierney discusses money and accommodation costs.
Just like power and food, rent and mortgage payments are weekly or fortnightly sums that must be paid.
The question most people wanted the answer to was: Do I rent or do I own? Mr Tierney said.
"We (Jubilee) worked out a scenario of paying the mortgage on an average house in Southland and renting an average house in the region and the difference between them. It worked out cheaper to rent," he said.
A house was a home in the first instance and while many Southlanders also treated it as an investment, there needed to be a long-term view before money would be made, he said.
Mr Tierney said the cost of rates, insurance and maintenance needed to be factored into the decision.
"You could be up-to-date with your mortgage but overdue with your rates. The council can then issue a demand to your bank to pay your rates, which leaves you behind on bank payments."
Renting would never give the same stability as ownership but it could provide a short-term fixed cost, particularly if you did not intend to stay in the town, he said. "Remember, property can also go down in value, interest rates can increase and there can be large costs (legal and real estate) to sell," he said.
There were many positive reasons for owning your home but Mr Tierney advised people not to get caught up in the hype.
"If you are classing your home as an investment, take a long-term view and have a plan B if the costs go up," he said.
Free budgeting workshops will be held today at the Central Baptist Community Centre, Invercargill.
The morning session will run from 10.30am to noon, with the evening session from 7pm to 8.30pm.
It was a good time for people to learn about common misunderstandings in personal finance and learn how to budget and make it balance, Mr Tierney said.
SIMON TIERNEY TIPS
Check out www.sorted.org.nz to compare the weekly difference paying your house off over 15 years instead of 20 – you may be surprised how affordable it is or it could be a goal to work on if you get a pay increase or complete another credit contract.
Look into a higher insurance excess on your home and pay the difference (saving) off your mortgage per week. Practise paying the mortgage at an interest rate say 3 per cent more than you are currently paying.
When interest rates do move higher, you will be already used to the increase and in the meantime you can pay down your debt.
Take on a boarder if you have the space available.
- © Fairfax NZ News
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