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Calculator doesn't show the benefits

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  • Calculator doesn't show the benefits

    Calculator doesn't show the benefits

    ALEX FENSOME Last updated 05:00 21/12/2013

    CRAIG SIMCOX/ Fairfax NZ
    MORE OPTIONS: Renters Tiffany Foskett and Jamie Bell say the extra $20,000 added to the house price cap ‘‘allows us more flexibility’’. They are pictured outside their rental home in Ngaio.



    ON OFFER: This Upper Hutt home has an asking price of $329,000.

    FOR SALE: This Lower Hutt home has an asking price of $360,000.



    It's a debate that has been around for as long as we have had a property market - is it financially smarter to buy or to rent?
    The Dominion Post has done its sums on the Wellington property market and come up with the answer - well, sort of.
    In strictly financial terms, there's little doubt that renting is the best option. But, of course, it's not as simple as that, which is why people have been arguing about it for so long.
    To work out relative costs in the region, we selected four houses in Wellington city, Lower Hutt, Upper Hutt and Porirua that were listed for sale on Trade Me last week, around the average prices for their area.
    We then ran these through the Westpac bank mortgage calculator, assuming a 20 per cent deposit, annual joint income of just under $100,000 - the kind of salary a young professional couple might make - and a 30-year mortgage term. We also found out the rates bill for each property.
    To work out the rent, we looked at weekly market rent figures from the Ministry of Business, Innovation and Employment for the relevant type of house in each suburb and multiplied that by 52 weeks. We did not include costs such as maintenance - likely to be about $2000 a year - or insurance.
    On paper at least, renting came out best, which was no surprise to Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research, who is known for his opposition to property as an investment.
    Read more
    http://www.stuff.co.nz/business/mone...w-the-benefits
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    They also fail to mention that over the life of a mortgage the repayments keep reducing, which isnt the case for rent. That economist is probably also on a salary whereby he can afford to rent, invest in shares save for decent retirement etc and most people cant do that.

    Comment


    • #3
      You can also take a longer term view, buy your property now, in order to help your children get ahead in life by either inheriting your property or by having easy access to capital in a family trust. Try using shares as security on a mortgage!

      Also, in 30 years time the home owner has an asset worth $360k + 30 years in capital gains + cheap living costs for as long as they can live in the house, vs the renter who has saved an extra $4k a year, and will quickly lose those savings when they are still renting at 85 years old. Personally I can't see how renting even gets close to the benefits of being a homeowner!

      Comment


      • #4
        Simple or complex appraisal? Depends
        on the answer one desires OR the at-
        tention span of the reader.
        Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

        Comment


        • #5
          Generally the best financial answer is to rent yourself, but buy rental properties in the short term. Long term you would restructure your equity to have a debt free personal house or near debt free personal house.

          Lots of people trying to get ahead live cheaply with family or rent a cheap property. They then get more from their rental than they are paying themselves. They would also get tax refunds on the rental if it was losing money, whereas a personal home you don't get any, even if the cost to you is more than fair market rent. Also chattels depreciation can give further tax refunds.

          Ross
          Ross
          Book a free chat here
          Ross Barnett - Property Accountant

          Comment


          • #6
            Originally posted by BigBadWolf View Post
            You can also take a longer term view, buy your property now, in order to help your children get ahead in life by either inheriting your property or by having easy access to capital in a family trust. Try using shares as security on a mortgage!

            Also, in 30 years time the home owner has an asset worth $360k + 30 years in capital gains + cheap living costs for as long as they can live in the house, vs the renter who has saved an extra $4k a year, and will quickly lose those savings when they are still renting at 85 years old. Personally I can't see how renting even gets close to the benefits of being a homeowner!
            Apparently you can by using a Margin Loan on the shares


            Originally posted by shareforum
            The lender will use 80% of the value of the property as security, so you would only have to fund the 20% usally needed for a deposit through your margin loan.

            Comsec has a list of the lending ratios they give on their website, depending which company it is they will lend any where from 75% to 35% of the shares value.

            So for example if you wanted to buy a house for $300,000,.. the bank would lend you 80% of that value so you would have to come up with $60,000 deposit,... But if you had $100,000 of BHP shares the bank will lend 75% of the value of those shares, So they would use upto $75,000 to cover your deposit.

            Offcourse as normal though, Having enough security is only part of the issue. You also have to prove you can service the loan. The Bank will want you to service the loans using no more than 40% of you income from all sources, your wage, dividends, rental income etc etc.
            RedWing

            Still Learning.............

            Comment


            • #7
              Originally posted by BigBadWolf View Post
              You can also take a longer term view, buy your property now, in order to help your children get ahead in life by either inheriting your property or by having easy access to capital in a family trust. Try using shares as security on a mortgage!

              Also, in 30 years time the home owner has an asset worth $360k + 30 years in capital gains + cheap living costs for as long as they can live in the house, vs the renter who has saved an extra $4k a year, and will quickly lose those savings when they are still renting at 85 years old. Personally I can't see how renting even gets close to the benefits of being a homeowner!

              Totally agree with you on that view. I believe that it is a lot wiser to buy a house and pay that rather then paying rent.
              However, there are rent to own conditions also. Worth a look depending on the bank of course.

              Comment

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