Yes, you can save thousands on your mortgage with flatmates or boarders. It also relieves the financial stress with the high cost of living in NZ today. Many homeowners are exploring shared living to maximise home savings. This is the ultimate guide to ensure mutually beneficial, harmonious and sustainable shared living arrangements.
How Flatmates Can Save You Thousands on Your Mortgage Interest
Initial Mortgage Details:
- Mortgage Amount: $750,000 NZD
- Interest Rate: 7%
- Flatmate pays $300 per week.
- $300 pw x 52 weeks = $15,600 per annum x 5 years = $78,000 savings over 5 years
Note – the actual savings are larger. If you pay principal and interest, your $750,000 gets less and therefore the interest you save is actually more than stated. We have just kept the example simple for illustration purposes.
However, the rental income above is only one of the ways you can save money on your mortgage payments. We list the additional cost savings as follows:
More Savings other than Mortgage Payments
- Splitting utility bills of electricity, water and internet
- Economies of scale and opportunities for bulk purchases on non perishables (Cosco)
- Home Equity Build up
- Flexibility by having more than one flatmate leads to double the benefits
- Financial Safety Net for unexpected expeneses and enhancing overall financial stability
Remember to incorporate the tax / legal aspects of having flatmates / boarders.
Opportunities to Explore Mortgage Structures to Save on Mortgage Payments
Increased Income. The extra income can boost your overall financial profile. Banks consider your income when assessing your mortgage eligibility. With a higher income, you may qualify for more favourable terms.
Debt-to-Income Ratio Improvement. A key factor in mortgage approval is debt-to-income ratio. A lower ratio indicates that a smaller percentage of your income goes towards debt payments, which makes you a more attractive borrower.
Demonstrating Repayment Capacity. Lenders need assurance you can afford your mortgage. A steady rental income (from your flatmates), demonstrates your ability to generate additional funds. Therefore, you displaying you are a responsible borrower.
Potential for Joint Mortgages. If you buying a property with a flatmate, and both of you contribute to the mortgage, the possibility of a joint mortgage is opened. One of the advantages of this is shared responsibilities and potentially better terms.
Interest Rate Negotiation. With increased income and better financial standing, you may be in a better position to negotiation a lower interest rate.
Flexibile Repayment Options. Some mortgage structures may offer flexibiity in repayments. Explore mortgages that allow you to make additional payments during high earning months.
It is essential to discuss and explore mortgage structures with your mortgage broker. They are experts and will advise you the best structures for your situation.
Disadvantages and Potential Downsides of a Flatmate
- Concerns about Privacy
- Differences in Lifestyle – Set clear boundaries and expectations to avoid confusion and make sure everyone gets along in the home. Homeowners don’t have much control over what their flatmates do and how they act. It can be hard to handle problems with cleanliness, following house rules, or other parts of living with other people.
- Higher wear and tear – More occupants in a home could lead to increased wear and tear on the property. Homeowners may need to invest more in maintenance and repairs due to the higher usage of common areas and facilities.
How to Maintain a Sustainable Positive Living Environment to Ensure You Save Thousands on Your Mortgage
In a shared living situation, you can help maintain a good social atmosphere. Make a home that is friendly and peaceful. People must talk to each other often and work to understand each other’s wants and needs. When everyone works together, living in a shared space, with friends or with a boarder, can be fun. In New Zealand, where group spirit is very strong, it is important to keep the atmosphere positive and long-lasting. Applying these tips will ensure you are able to continue enjoying saving money on your mortgage payments.
- Firstly, create Clear Communication Channels: Effective communication is the cornerstone of a harmonious shared living arrangement.
- Respect Personal Space:
- Establish boundaries and encourage everyone to communicate their need for personal space.
- Encourage Inclusivity: Celebrate diversity within your shared living space.
- Establish clear guidelines for noise etiquette, especially during designated quiet hours.
- Encourage a proactive approach to conflict resolution.
- Incorporate eco-friendly practices into your shared living space can contribute to a positive environment.
- Ensure sustainable living practices, it not only benefits the environment but also fosters a shared sense of responsibility.
Moreover, creating and keeping a positive living environment in shared living spaces takes patience, and time. You can make New Zealand a better place to live by applying these tips in almost all circumstances. These practises not only make everyday life better, but they also add to the rich tapestry of shared living experiences.
Further Considerations in Shared Living
- Compatibility. Looking at how well the two people’s lifestyles, habits, and ways of communicating, will work together to make sure the living situation is peaceful.
- Stability in finances. Checking out a possible roommate’s money problems to lower the chance of payment problems or fights
- Lifestyle Match. Taking into account shared hobbies and lifestyle choices to make living better overall.
Shared Expenses and Agreements
- Sharing Costs and Agreements. Make Detailed Agreement—writing down a detailed agreement that spells out financial duties, house rules, and expectations to avoid confusion.
- Make Clear Communication on Expenses. Creating open lines of communication to talk about and settle shared costs, making sure that everything is clear and fair.
- Handling Unexpected Costs. Coming up with ways to handle unexpected costs as a group. This way, no one person has to put too much financial stress on themselves. Consider building a Joint Emergency Fund.
- Mitigate Financial Risks. Jointly identify potential financial risks associated with shared living and implement measures to minise these risks.
Finally, considering flatmates to share your home can be a smart financial move that can help lower your mortgage payments. By working together, homeowners can lower their individual financial burdens. It will also save homeowners a lot of money over the life of their debt. This choise not only makes money worries less stressful, but it also builds community and a feeling of shared responsibility. Housing costs and cost of living is through the roof in NZ at the moment. Therefore, new ideas, like living with flatmates can help you save money right away. It also gives you the chance to make lasting connections. This changes how we think about property in today’s constantly changing economic climate.
Remember to connect with your mortgage broker to ensure you have the optimal mortgage structures in place, so you derive maximum benefit though your shared living arrangement!