Buying your first home is exciting and feels like a right of passage to adulting. Sadly though, too many Australians overspend, which turns their homeownership dream into a nightmare of persistent stress.
In fact, over half of ‘young growing families’ are experiencing mortgage stress – and that was before COVID-19. (Source: Digital Finance Analytics, February 2020).
It is essential to get your affordability calculations right because it is a costly decision to correct by downgrading.
Use this checklist to be a money-savvy home buyer and avoid mortgage stress.
20% deposit saved (so I can avoid lender’s mortgage insurance)
Extra 5% saved for transaction and set-up costs (stamp duty, moving, furniture)
Proven I can afford the repayments by saving at the same rate as my loan repayment may be.
Home building insurance budgeted for
Extra emergency savings (at least three months’ living costs)
I have budgeted for:
(Couples) Affording repayments on a lower income while raising a family
Ongoing building maintenance to keep my house fresh, inside and outside. (Allow at least 2.5% of the building cost per year. )
Income protection insurance to cover my living costs if I am seriously ill or injured.
The hidden cause of housing-related stress is not being able to afford important life experiences because you overspent on your home. Be a money-savvy home buyer and cater for these items.
I have budgeted for:
Predictable expenses like replacing my lifestyle items without borrowing. e.g. Contents and vehicles
My other life ambitions (e.g. wedding, holidays, family, education, and self-employment).
Affording repayments if interest rates increase up to 2% during my loan term
You may be thinking, how many people actually do that? Not enough – that’s why one-third of all homeowners are in mortgage stress. (Source: DFA)
If you want your financial situation to be strong, not stressed then be savvy!
Matt Hern CFP® is a Money Coach who specialises in helping you spend smarter, save more and afford the life you'd love.
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