Latest CVs present temptation to borrow

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 life-enhancing.

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.

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.