Sometimes buyers can focus too much on a price when they’re negotiating to buy a new home. More often than not it’s because they feel if they go any further they’re paying too much.
I ask, in the context of affordability being no issue, does that really matter? The value of a property is purely the value the holder places on it.
If you see a property that is your ‘dream home’ and you have got the funds or resources, buy it. No doubt, it’s a different story if you are at maximum borrowing because of stretched resources.
This is based on my approach to life. It’s too short. Enjoy life while you can and since most of us take a good deal of pride and satisfaction in where we live, don’t be constrained by someone’s view whose taste, life experience and expectations are different to yours. Unlike a motor vehicle that generally depreciates 20% as soon as you drive off the lot, properties often appreciate over time.
I find the easiest way to get my head around things is to forget about the ‘lump sum’ difference between what the vendor wants and what you are prepared to pay. Will you and your family enjoy living there? Could it be the family home for the next 10 or more years? Does it offer more than the other properties you have looked at and is affordable? It’s about finding the balance between the head and heart. If you let the head rule, you might lose a house you love over $10,000 or $20,000 that over 10 years will seem insignificant in terms of the pleasure it brings and the impact on your bank account.
It’s a dilemma I see people grapple with frequently.
My approach is to see the extra you are being asked to pay as a ‘daily amount’ on your mortgage. Something you might buy on a daily basis. It helps me find context. Often, it boils down to what is an insignificant amount of money – sometimes a few gold coins.
Perhaps it’s like sharing a cup of coffee once or twice a day.
If you’re talking an extra $5,000, surprisingly the difference in interest may be as little as only 83c* a day!
Happiness for you and your family is priceless. Don’t feel pressured to repay your mortgage fast. It’s a fallacy that it will make life better or easier. It’s generally when you have a young family that you’ve got the larger home loan. To have someone come into your house and preach the values of a shorter term may not be what you want to hear, especially when cashflow is critical in a number of areas because it will only reduce your disposable income.
Interest only home loans are always an option. Having no mortgage won’t make you any happier. What makes people happy is their environment. Comfort, security, wellbeing and a sense of being wanted are what makes us feel happy.
Go ahead enjoy your new home.
That’s my view but as always you should seek independent legal and financial advice specific to your personal circumstances.
At 6%pa* (interest only)
What it will cost?
$5,000 - 83c a day
$10,000 - $1.66 a day
Less than the cost of 1 daily newspaper
$20,000 - $3.32 a day
Less than the cost of 1 small flat white
$50,000 - $8.30 a day
Less than the cost of 2 large flat whites
Interest only cost (per day)
Mike Pero is one of New Zealand's most recognised faces on TV when it comes to home finance and real estate. He started as a one man band in the early 90s and today has close to 100 franchises specialising in both finance and real estate.