Times have been a little tougher recently for homeowners, with interest rates rising from record lows.
With the cost of ownership rising, some people might have started to wonder whether it’s worth it, if owning means paying more than renting. And first-home buyers might have started to feel a bit discouraged at the prospect of higher repayments.
But while interest rates move up and down over time, it’s important to keep your eye on the long term and remember why homeownership can be, for most people, a big and important part of overall financial wellbeing.
Here are five reasons why being a homeowner is valuable, whatever the interest rate environment.
Your loan isn’t forever
Although it might not feel like it at the beginning, you won’t have a home loan your whole life. Eventually, you’ll have paid it off and you will be mortgage-free.
Over time you may be able to bump up your repayments as your income increases or your outgoings lessen – and this could see you get out of debt faster. By contrast, if you’re renting you will always have rent to pay.
It sets you up for a better retirement
One of the biggest determinants of a comfortable retirement is owning your home mortgage-free.
As Te Ara Ahunga Ora the Retirement Commission notes, superannuation was not designed to cover rent and assumes that retirees have their housing sorted.
At the moment about 12% of people aged 65-plus are still paying a mortgage, and another 12% are renting (which is expected to increase). If you are a tenant, you’ll likely need to save a lot more money to have the same lifestyle in retirement as someone who has paid off their home.
To have a similar level of security in retirement as a renter, you’d need to save a significant sum – either to cover your rent after you finish working, or to buy a house to live in at that point.
It’s a type of forced saving
People sometimes argue that they’ll rent and save the difference between what they would have paid on a mortgage.
The problem is that often this doesn’t happen. Life gets in the way and the savings are used for other things. When you’re paying off a mortgage, it’s a type of ‘forced savings’ that ensures you have some money (through equity) behind you as you get older. Over time, your property is likely increase in value too, boosting your equity. Of course, there are costs associated with owning a property, and markets can fluctuate, so it is important to consider your situation and your goals and objectives to determine if property ownership is, or continues to be, right for you compared to other options.
You have more stability
For many people, one of the big pitfalls of renting is the potential for a landlord to sell the home and ask you to leave. When you own your home, on the other hand, it’s up to you if and when you want to put it on the market and move, except in rare circumstances of serious financial distress.
If you know that you’re not likely to want to move around a lot in the next few years, and you’d like to put down roots in one spot, being a homeowner could be the best way to do this.
It gives you more flexibility
Homeownership also gives you a lot more flexibility about your living arrangements.
While you do have the responsibility and financial costs of ownership, it comes with a lot of freedom. You can paint your walls any colour you like, plant the garden the way you want, and have pets. You aren’t restrained by the same rules that a landlord might put on you. Plus, you don’t have to worry about regular inspections from a property manager checking out how clean your house is.
Ready to act?
Whether you’re already on the path to homeownership or just wondering where to start, get in touch. We can help you navigate your way through how much you might be able to borrow, what the repayments could be, and how to repay your mortgage faster once you have it. Give us a call today.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.