Fall­ing in love is to blame for blow­ing the home bud­get


MOST of us start our house search with a strict bud­get in mind, but a mind-blow­ing 22 per cent of buy­ers have re­vealed they went over their spend­ing limit when they bought their last prop­erty; and love is to blame.

Fall­ing in love with a prop­erty was the main rea­son given in a sur­vey by ME Bank for spend­ing more on a prop­erty than planned.

Just over half (52 per cent) of re­spon­dents said fall­ing in love was the rea­son for spend­ing more, 28 per cent un­der­es­ti­mated the bud­get re­quired, 20 per cent were sim­ply im­pa­tient, 15 per cent blamed un­der­quot­ing by an agent and 12 per cent found them­selves caught up in a bid­ding war.

The amount the buy­ers went over bud­get var­ied widely. The sur­vey found that of those who smashed their bud­get, al­most half (46 per cent) ex­ceeded their limit by $30,000 or more. Al­most a third (30 per cent) went over by $50,000 or more, and 10% ex­ceeded their bud­get by an eye-wa­ter­ing $150,000 or more.

Bust­ing the bud­get like that does not come with­out con­se­quences. Al­most two-thirds (62 per cent) of those who went over their spend­ing limit ad­mit­ted to hav­ing some kind of neg­a­tive con­se­quence as a re­sult. Al­most one in three peo­ple said their over­spend­ing im­pacted other fi­nan­cial goals, 27% said they had to make changes to cur­rent spend­ing, and 24% said they ex­pe­ri­enced emo­tional stress as a con­se­quence.

ME Head of Home Loans Pa­trick Nolan said buy­ing a home is one of the big­gest and most emo­tional pur­chases you’ll ever make.

“When it comes to spend­ing within your means, there are two points dur­ing the home buy­ing process where you need to get it right,” he said.

“The first is when you cal­cu­late what you can bor­row – and while your bank is legally ob­li­gated to only lend an amount you can af­ford to re­pay over the life of the loan, in­clud­ing at a higher in­ter­est rate – it’s your re­spon­si­bil­ity to en­sure the in­for­ma­tion you pro­vide them, par­tic­u­larly your ex­penses, is ac­cu­rate, so they can make an ac­cu­rate long-term as­sess­ment.

“The sec­ond point is at the mo­ment of pur­chase where it’s the re­spon­si­bil­ity of the buy­ers to re­main within their set spend­ing limit, par­tic­u­larly if that limit is based on the max­i­mum amount that can be bor­rowed from the bank.”

Those buy­ers who did man­age to stick with their bud­get were able to avoid get­ting car­ried away by hav­ing pa­tience (74 per cent), fol­lowed by avoid­ing auc­tions to avoid bid­ding wars (27 per cent), buy­ing a home in an al­ter­na­tive or cheaper lo­ca­tion (21 per cent) or ad­just­ing their ex­pec­ta­tions, for ex­am­ple buy­ing a smaller house (13 per cent).

Mr Nolan said stay­ing pa­tient, keep­ing your feel­ings in check, or­gan­is­ing some­one else – a fam­ily mem­ber, friend or buyer’s agent – to buy for you are all good op­tions to avoid break­ing the bud­get.

Photo: Jupi­ter­im­ages

DREAM HOME: Fall­ing in love with a prop­erty is be­hind most bud­get blow-outs.

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