Buying your first home is exciting and feels like a rite of passage to adulting. Sadly though, too many Australians overspend, leading to years 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.
Sensible
I have:
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)
Smart
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.
Savvy
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!
Save More While Still Enjoying Life
To help you be a savvy home buyer in a strong financial position check out my free course.