Lat­est CVs present temp­ta­tion to bor­row

Auckland City Harbour News - - OPINION -

Woo-hoo! The coun­cil has val­ued your prop­erty and your net wealth has just leapt.

This week saw Auck­land Coun­cil re­lease the CVs (cap­i­tal val­u­a­tions) for all our homes and we Auck­land ants crashed its web­site try­ing to find out what our ant hills were worth.

Many peo­ple’s first re­ac­tion will be the shocked ‘‘ how much?’’.

This is the re­ac­tion of sane peo­ple who bought houses a long time ago, who sim­ply can’t grasp that there are peo­ple who can and will pay sums of that kind for a home.

Oth­ers will rub their heads and won­der if it is time to cash up and move to Hamil­ton.

Oth­ers will rub their hands with glee.

They feel richer. Per­haps it’s time to buy that hol­i­day, or car, or boat.

I read a re­port about peo­ple seek­ing to bor­row against their homes for such things as a re­sult of feel­ing richer thanks to the CV re­leases.

I dearly hope the re­port wasn’t cor­rect.

I am not against new boats, hol­i­days and cars but I wouldn’t bor­row against the home for them.

It is ev­ery per­son’s right as a free New Zealand cit­i­zen to go deeper into debt slav­ery and en­rich the banks still fur­ther by pay­ing them even more in­ter­est.

But as a fairly con­ser­va­tive per­son I be­lieve the bedrock of a pros­per­ous, sus­tain­able fam­ily is a debt-free home.

And I be­lieve it’s mad­ness to spend your cap­i­tal or your eq­uity on lux­u­ries, no mat­ter how lifeen­hanc­ing.

That eq­uity and cap­i­tal is your pro­tec­tion against the fu­ture.

It is your se­cu­rity and that of your loved ones. The aim should be to guard it and grow it.

If you want a boat, give some­thing else up and save up the money.

There are some things I wouldn’t crit­i­cise a per­son for bor­row­ing against the home for. A mod­est, nec­es­sary car. A nec­es­sary med­i­cal treat­ment the state won’t fund (or won’t fund un­til you are prac­ti­cally dis­abled) would also tick the box.

And yes, even a boat, if you are run­ning a business char­ter­ing it.

Home im­prove­ments can serve to in­crease eq­uity, which is great if you are plan­ning to sell but it’s easy to go over­board and end up liv­ing in a show home with crip­pling mort­gage pay­ments.

Some like to use the eq­uity in their homes to buy in­vest­ment prop­er­ties or to fund a business.

They are tak­ing cal­cu­lated risks to make in­vest­ments in their fu­ture.

That’s very dif­fer­ent from tak­ing on debt (and the risk and cost it brings) to con­sume.

The other thing I have al­ways felt about debt is how very real and en­dur­ing it is.

That $30,000 owed to the bank has to be paid back, re­gard­less of what hap­pens to­mor­row.

By con­trast, the ve­rac­ity of your home’s CV can only be judged when you sell it to some­one else.

When I checked out the no­tional value of the anthill I oc­cupy, I read the dis­claimers which re­minded me of this.

Auck­land Coun­cil ‘‘ac­cepts no li­a­bil­ity for any er­ror, omis­sion or in­ac­cu­racy of the in­for­ma­tion or from any use of or re­liance on the in­for­ma­tion pro­vided by this web­site’’.

The CVs are all part of a mas­sive ex­er­cise in de­cid­ing whether your rates bill should be big, vast or im­mense.

CV ac­cu­racy is aimed for. But it is not guar­an­teed.

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