Traditionally New Zealanders have prized the idea of home-owning. Perhaps that stems from the fact that New Zealanders are a nation of immigrants who left their country of origin for a better life.

19th century immigrants couldn’t believe their luck to find they had come to a country where it was possible to own a detached house on a quarter acre section as this allowed them to keep a cow, some chickens and plant vegetables and so become largely self sufficient.
Not surprisingly, such a legacy has become deeply ingrained in the national psyche and New Zealanders have the highest home owning ratio per capita in the world followed at a significant distance by France.

However, when it comes to buying a home, most people are ruled by their hearts and are sold on the idea that happiness is likely to increase exponentially if they purchase the house that most closely resembles their dreams. It could be said that real estate agents know their job is as good as done when clients start mentally moving their possessions into a house.

Having made an emotional commitment to a house people are then prepared to do battle to secure the dream but need to recognize that they may put their current and future life style at risk if they over-commit financially.

Niall Ferguson in his recent television program series “The Ascent of Money”, gives us some timely advice when he states that “… the key (to investing our savings in real estate) is to strike the right balance between debt level and income…”

Undoubtedly, this level-headed advice is hard to heed when a house comes close to meeting our dream of home but it’s important to appreciate that the real risk of home owning is that the cost of interest might outstrip your ability to pay. And never more so than currently, when overseas markets are volatile, job security is less certain and, through time, family commitments might alter and this might change what can be afforded.
On the basis of this, Ferguson’s argument for committing to a more affordable house and building equity in it quickly to ensure early ownership of a financial asset is a good one. This because it enables people to safely secure a house that more closely resembles their dream at a later stage. In the mean time they can maintain a reasonable standard of living and have peace of mind that the bills can be paid out of their current income.
If you feel your mortgage costs are taking you out of your comfort zone or the amount of principal you are paying is small in comparison to the interest you are paying, check us out. Log onto www.homeloanrebate.co.nz and find how much you are unnecessarily paying to your lender. A preliminary analysis is obligation free so what have you got to lose?