YIPPEE you have the got the house! It’s most Kiwi parent’s dream is to see their children in their own home, just like them….its the pinnacle of success.
But now you have to face the fact that you have a home but you also have a mortgage and if you live in Auckland (NZ), that could be $800,000 just to get into an ‘averaged’ price home.
On top of the mortgage there are all the other expenses that go along with home ownership like rates, insurance, maintenance. Then, possibly additional transport costs if you have moved further away from where you work to get onto the property ladder.
If you haven’t factored all of this into your home ownership calculations, you may be feeling a little stressed at the enormity of the obligation you have taken on. I am sure there are some days when you wish you hadn’t. Maybe that happens on the days when friends invite you out for dinner and drinks and you have to say “No” because your money just won’t stretch that far this week (or month).
How does this make you feel? What is the conversation with your partner? Philosophical – “we knew we would have to make sacrifices in the short term when we bought the house.” Or, a little more resentful – “when we were flatting we had a social life” or “why did you talk me into this, I hate being broke!”
Your mortgage rates increases by 2%
If the stress of money worries are already playing on your mind and niggling at your relationship what would happen if the interest rate on your mortgage increased by 2%?
Could your finances handle it? Could your relationship?
Let’s crunch some numbers to give you an idea of the impact.
We’ll be optimistic and assume you have a $600,000 mortgage over 30 years and your current interest rate is 4.59%. Your monthly repayments would be $3,072 per month.
Now, what if the rates increased by 2% so you’re now paying interest of 6.59% which means your repayments increase by $756 to $3,828 a month.
If you have the Auckland $800,000 mortgage, the increase is $1,008 per month!
Where is this additional money going to come from?
You have already cut your lifestyle just to get into the property and may already be feeling a little trapped. Now you have to find more money each month to make ends meet.
There are a couple of short term solutions you could look at. How about taking in a flatmate or two or switch to interest only for a year or so. Both these options will give you a bit of breathing space but may not be that palatable in the long term.
But what if you already have flat mates, and are on interest only? How much stress are you under now? And how much of that stress is effecting your relationship?
Money stress is the main contributor to relationship breakdown.
If you struggle to talk about money, then this scenario could break you.
You may poo poo the idea of this kind of mortgage increase, but it isn’t beyond the realms of possibility. So you need to give it serious consideration when you are in the planning phase of borrowing money to buy your home.
This is also where a reputable mortgage broker is invaluable at helping you work through these different scenarios.
Don’t get caught short either financially or lose your relationship just to buy a house. Home ownership is supposed to be a pleasurable experience, not a millstone round your neck.
Here’s a thought
You don’t need to own the home you live in. There is nothing wrong with renting where you want to live and owning a house in an area where someone else wants to live.
If you want to get really clear about your money go to our website and download our FREE Money Mind Starter Kit.