Falling in love is to blame for blowing the budget
MOST of us start our house search with a strict budget in mind, but a mind-blowing 22 per cent of buyers have revealed they went over their spending limit when they bought their last property; and love is to blame.
Falling in love with a property was the main reason given in a survey by ME Bank for spending more on a property than planned.
Just over half (52 per cent) of respondents said falling in love was the reason for spending more, 28 per cent underestimated the budget required, 20 per cent were simply impatient, 15 per cent blamed underquoting by an agent and 12 per cent found themselves caught up in a bidding war.
The amount the buyers went over budget varied widely. The survey found that of those who smashed their budget, almost half (46 per cent) exceeded their limit by $30,000 or more. Almost a third (30 per cent) went over by $50,000 or more, and 10% exceeded their budget by an eye-watering $150,000 or more.
Busting the budget like that does not come without consequences. Almost two-thirds (62 per cent) of those who went over their spending limit admitted to having some kind of negative consequence as a result. Almost one in three people 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.
ME Head of Home Loans Patrick Nolan said buying a home is one of the biggest and most emotional purchases you'll ever make.
"When it comes to spending within your means, there are two points during the home buying process where you need to get it right,” he said.
"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.”
Those buyers who did manage to stick with their budget were able to avoid getting carried away by having patience (74 per cent), followed by avoiding auctions to avoid bidding wars (27 per cent), buying a home in an alternative or cheaper location (21 per cent) or adjusting their expectations, for example buying a smaller house (13 per cent).
Mr Nolan said staying patient, keeping your feelings in check, organising someone else - a family member, friend or buyer's agent - to buy for you are all good options to avoid breaking the budget.