?? Is renting really a waste of money? The mortgage TRAP

We all know by now that Kiwis love to buy properties. As an investment class the odds have been stacked in its favour...for decades.

Add to that, outside of wanting to be an All Black, for most Kiwis, the dream is to own a home.

In New Zealand we see property as an investment vehicle. In a lot of other countries people see a property as shelter.

 I was speaking to a group of financial advisors last week and one asked me about rent being more expensive than a mortgage so it’s a no brainer to buy a home in NZ, AS FAST AS YOU CAN. I understand this, I've done it before and get where it comes from.

Then at a dinner on the weekend I mentioned that I rent. The first question I got was ‘what do you pay for rent?’.

As soon as they knew, they said ‘that's interest on a mortgage of a $xxxx’ house. It was like he’d already run a spreadsheet on this and just had to pull it up in his mind.

That line of thinking forgets the deposit required for a house and the actual loan repayments. Or that you don't want to buy a house. Or that you love where you live. Or that you hate maintaining a section. Or that you don't know where you want to live yet. But anyway...it is a very common line of thinking. ‘Your rent is ‘x’ amount of interest therefore you should have 'this' sized loan’.

 Through researching money, finances and humans, it almost seems like you’re not allowed to suggest that renting COULD be a good option let alone consider it as a good idea.

 I think avoiding the tough conversations of the downsides of buying a home isn’t very smart either.

Let me give you part of my response to the question of the advisors. I said, what about the people that rush into buying a home, get sick of their job, are miserable every day going to work but have to, to pay down debt?

What is the non-financial cost of this in our society in terms of productivity, stress and happiness? This is near on impossible to measure so we just ignore the tough conversations and pretend there are no downsides to owning a home. 

Q: ‘Why don’t you quit your job and get happy?’

Q: ‘Why don’t you move if you don’t like where you live?’

Q: ‘Why don’t you take a break if you so need one?’

A: ‘I can’t, I have a mortgage’

A common reason for people not chasing their dreams or having a crack at things that will bring them fulfilment...a mortgage.

A house can be a trap for some people & we need to understand that before buying. No one is going to tell you that...because it’s not popular opinion nor fit with what we are taught to do.

There is no right or wrong answer when it comes to whether YOU yourself should own a home. There are clearly pros and cons to both renting and owning. Perhaps we need a live stream to discuss some of these in more detail sometime soon.

Same with those of you who are currently renting, you are ok, nothing is ‘wrong’ with you.

Everything starts with identifying what you want from life. If it’s a house, cool, build a plan to achieve that. If it’s flexibility, great build a plan to make that possible.

When I look to the future I see prices of houses increasing and getting even further ‘out of reach’ for many when it comes to a deposit and loan repayments. If interest rates rise - how will paying down debt even be possible?

I see rent controls too. These will look like limits on how much a landlord can increase rent.

Maybe we are moving towards a time where renting becomes 'ok' or a 'good idea'. We will have to wait and see.

Again, we find ourselves in a time where the answers are tricky to find. We must figure out what is most important for us and head down that path.

 Rent it, buy it? You do you!

Luke