Housing wants vs housing needs-the more you want the more you pay.
Housing in many parts of Australia is expensive and getting more so each year. There are numerous reports calculating the high ratio of household income to property prices and can make scary reading. But it’s not the whole story.
Australian Bureau of Statistics (ABS) figures show that 85.6% of owner occupier households have at least one bedroom more than they need for the number of people living in the house. For renters it was slightly lower at 60.9%.
There is a cost attached to the desire to have more space than we need.
In my world of home and investment property loans, this struggle between housing wants vs housing needs translates into larger home loans. Follow this forward to the property buyer and we have borrowers with larger loans, larger repayments and lower surplus income. The outcome is that borrowers have more difficulty paying their loans off quickly and pay back much more interest to the bank.
One thing has become glaringly obvious to me over the years, both professionally and through my own struggles as a home owner and borrower. Do whatever you can to find ways of reducing the amount that you spend buying a home. You can:
- Pay less for your home by buying what suites your needs, not your wants.
- Stay in your home longer as buying and selling is very expensive
- Pay off your home loan as quickly as possible reducing the interest paid on your loan
This will have a tremendously powerful and positive effect on your financial life and your overall well being. Don’t believe me. Go find someone who has paid off their mortgage and ask them how they feel financially.
Have a think about your real housing wants vs housing needs.
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