Rising Rents Make Homeownership More Appealing

auckland-councilLandlords across Auckland are raising the rent of their properties because of the large rates rise expected next year. With Auckland Council having acknowledged that rates will most likely rise, landlords have to decide whether to cover the cost themselves or pass it onto their tenants.

Rising mortgage interest rates, property rates and insurance premiums are all contributing to the increasing expenses costs faced by landlords. The rent for an average three bedroom home is expected to rise between $20 and $40 a week, making paying a mortgage more appealing than paying a landlord.

Stop Buying a House for Your Landlord
Landlords are in the business of making money through buying and renting of property. They have a mortgage on each property they own, as well as other expenses such as insurance, maintenance and rates. When you rent a property, you pay the landlord a sum of money which gives you the right to live in their property. Your rent covers their mortgage and other costs.

Landlords aim to make enough to cover all their expenses and have a small profit from your rent. But they also benefit hugely from the continually rising value of the home you are renting. The equity that the landlord earns can help fund them another property to rent, which earns them more money and the cycle continues.

A Fixed Mortgage is the Same as Paying Rent
Many potential homebuyers are put off by the cost of a mortgage. Yes, a mortgage is a serious responsibility and will cost you financially if you fail to meet the repayments, but so will failing to pay your rent. When taking out a mortgage, fixing it at a specific interest rate for a period of time will help you give certainty about your outgoing expenses, just like having a fixed rent to pay.

Choosing whether a floating or a fixed mortgage is best for you can be a tricky decision. Banks are in the business to make money, so for objective and impartial advice, it is best to consult with a mortgage broker. Their job is to get you the best deal for your personal and financial circumstances and is able to compare and advise you on offers from a range of lending institutions.

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