In a time where the cost of living is increasing significantly faster than our pay rises can keep up with, many ‘average’ New Zealanders are faced with fears that a home loan will cripple their finances. They worry that their ability to enjoy the lifestyle our beautiful country has on offer will be all but gone, replaced with 2-minute noodles, instant coffee, and no financial freedom to make other really important decisions – like starting a family or taking an annual holiday.
While a “bad” home loan can definitely have the potential to wreak havoc on your coin purse, it’s not all doom and gloom if you find the right package to suit your life.
It’s all about balance. The right property, at the right price, in the right place, at the right time, with the right debt level, and the right type of loan….OK, so it does get complicated pretty quickly.
Here’s five ways you can help make sure you don’t end up that local debt creek without a financial paddle:
The right home loan has so much potential to improve your daily cash flow
With rent prices hitting all-time highs due to such high demand on a very crowded rental market, you could actually be paying less on a home loan than on rent. While this potential varies hugely from region to region, it’s worth taking the time to look into. Having a home loan free up some cash? Now there’s the real Kiwi dream!
Save the shuffle for the dance floor
With money, the juggling act is very real. When trying to qualify for a home loan, shuffling the numbers so that they stay the same but appear to be much more ‘wealthy’ may seem like a great idea at the time, and may get you the big tick of approval from your bank, but at the end of the day you know your financial situation better than anyone. You won’t be doing yourself any favours in the long run by plumping things to appear more financially viable.
Steer clear of over committing
Now is not the time to be keeping up with the Jones’. Buying what you can afford sometimes means you may not get everything you need to impress your neighbours/frenemies with. Maxing out your finances on that dream home might seem like a great idea, but it gives you no room to manoeuvre. Give your equity a chance to grow in a property that’s more sustainable for your current situation, and in time the dream home will come.
There are different ways to borrow
Just like jeans, there’s no one-size-fits-all home loan. Take care in finding a lending style that suits your lifestyle. Finding flexibility within your mortgage is still possible – you just need to ensure your money is still working for you, however it is tied up. A home loan can be structured in a number of ways, meaning the way and rate at which it can be repaid can vary too.
Get more spending savvy
Find where you can scrimp so that you can still splurge when you need/want to. Mow your own lawns (you’ll save on a gym membership too!), get a tradie mate to help with renovations, and make cuts on any luxuries you could happily forgo to still be able to afford a weekend away every now and then. You may need to tighten the belt to get a deposit saved up, but committing to the right home loan doesn’t mean the fun in life is over.
Financial freedom is perfectly possible whilst committing a chunk of your cash flow to a home loan – you shouldn’t feel overwhelmed by financial dread. Like anything, you just need to find the structure that works best for you to ensure the purchase of your new home is the catalyst for financial security and freedom.