First Home Buyers in Danger of ‘Mortgage Stress’
The first home buyer grants boost in bonuses which have been offered in recent years initially appeared to help young Australians, as well as property industry, get through tough financial issues at home and abroad. However the generous government incentives for first home buyers made it very easy for Australians with little to no deposit or savings history to buy their first home and unfortunately many of these first home buyers who relied solely on a first home owner grants because they did not have enough of a deposit from their own savings also did not have enough financial experience or knowledge to be able to factor in how they would afford their new mortgages when interest rates inevitably started to rise again.
Now almost one in seven Australians who bought their first home in the two years to 2010 are facing significant debt on top of their mortgage in just the first two years of repaying their home loan. While recent economic uncertainty and almost consecutive interest rate rises have served to increase caution with many Australians, unfortunately first home buyers did not heed the warnings or look at the signs of what it really meant to make such a large commitment to their home loan.
Mortgage stress is not always the result of not being able to repay your home loan. It can also be brought about by the additional debt which comes with owning a home such as extra purchases made for furniture, homewares, new cars and celebratory holidays. First home buyers continue their spending habits from their mortgage free days and obtain finance using their credit cards, personal loans and interest-free offers from retailers for guessing that this debt will be on top of their regular home loan repayment. The lending criteria for this additional debt is also not as hard to manoeuvre as home loan preapproval and a quick bout of retail therapy can very easily land you with more debt at a much higher interest rate.
After the stress and paperwork of applying for a home loan and finding the perfect home it can be easy to think that the hard work is over. However when you take on a mortgage you are making a financial commitment for what is likely to be the next 30 years of your life and that is a very long time when you consider the changes your financial situation has undergone in the previous 30 years. Therefore you need to manage your home loan from day one and never become lax in your commitments because not only will your mortgage and credit rating and be at risk, but so too will the life you have built for yourself and your family within your home be put at risk.
At the same time your lender does not want you to default on your loan because that will cost them more money as they try and recoup their losses. Your lender would much rather you approach them when you first find that you are having trouble meeting your mortgage repayments because when you approach your lender, rather than them having to make phone calls or send letters or debt collectors, you are in a better position to seek help and negotiations can be made to refinance the loan or adjust the repayments until you get control of your finances.
If you are considering your first home loan or if you are struggling with the mortgage stress from your loan or you’re associated debts, contact Home Loan Finder as we can help you look at your budget to see what you are eligible for, what you can afford and how you can manage your home loan now and into the future.
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- Smart Ways to Beat Rate Rises and Mortgage Stress
- First Home Buyers Scheme
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