Twenty-two per cent of home buyers spent more than they had budgeted for when buying property, according to a survey by ME, an independent bank which is owned by industry superfunds.
The survey of 1,000 home buyers, which was completed in March 2018, found that of those who went over budget, nearly half – 46 per cent – exceeded it by $30,000 or more. Nearly one third – 30 per cent – exceeded their budget by $50,000 or more, and 10 per cent spent more than $150,000 over their budgeted amount.
The survey respondents said the over-spent because:
- they fell in love with the property (52 per cent)
- they underestimated the budget required (28 per cent)
- they were impatient (20 per cent)
- their agent underquoted (15 per cent), and
- they were swept up in a bidding war (12 per cent).
Two-thirds – 64 per cent – of the respondents said they had suffered negative consequences, such as emotional stress and being able to spend less, as a result of overspending on property.
ME Head of Home Loans, Patrick Nolan, said, “It’s important to stick to your spending limits.”
“There are two points during the home buying process where you need to get it right.
“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.”
The survey also showed how respondents remained within their spending limits: by remaining patient, avoiding auctions, buying a home in cheaper area, and buying a smaller house.
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