22% Of Property Buyers Blow The Budget
A new property survey by lender ME reveals 22% of home buyers exceeded their spending limit when they purchased their most recent property.
Of those who went over budget, 46% exceeded it by $30,000 or more, 30% exceeded their budget by $50,000 or more, and 10% exceeded their budget by $150,000 or more.
The most common reasons for exceeding their self-imposed limit were: falling in love with the property (52%); underestimating the budget required (28%); impatience (20%); underquoting by an agent (15%); and getting caught up in a bidding war (12%).
Sixty-four per cent of those who went over their budget admitted some kind of negative consequence as a result. For instance, 28% 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.
The survey also showed buyers are basing their personal limits on a variety of factors. The most common basis for spending limits was what people were comfortable spending to avoid too much debt (55%), other financial commitments (52%), the maximum they could borrow from their bank (46%), while 45% based their budget on what they thought was the market price.
ME Head of Home Loans, Patrick Nolan, said “buying a home is one of the biggest and most emotional purchases you’ll ever make. With so much at stake, it’s important to stick to your spending limits.”
“When it comes to spending within your means, 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.
“Our survey shows that of those who did remain within their budget the most commonly cited ingredient for success was patience (74%), followed by avoiding auctions (buying privately) to avoid bidding wars (27%), buying a home in an alternative (cheaper) location (21%), or adjusting their property expectations (i.e. buying a smaller house) (13%).
“Some strategies that can help you remain within your property buying budget include:
- “Stay patient – there will always be another property.
- “Keep your feelings in check and if you can’t, remove yourself from the situation by organising someone else to do the purchasing for you, either a family member or friend or even a professional buyer.
- “Change your buying criteria, including size, location, or style of property.""