Apologies for the article being a day late, I was in Orange for the Easter break enjoying all that fantastic regional city has to offer. More on Orange later. In our business we see all sorts of borrowers. Those that don’t need to borrow, first time borrowers, borrowers that struggle to get the minimum requirements to borrow and those people that should just walk away from borrowing. It’s the final category that I want to discuss in this article.
Respect yourself enough to walk away from anything that no longer serves you, grows you, or makes you happy. – Robert Tew
There are a few main reasons for people afflicted by this “I must have it at all costs” mentality. It could be that they’ve seen their dream home and are so emotionally attached to the idea of owning it that common sense and rational thinking are no longer part of their make up.
It could be that they have lived from pay-cheque to pay cheque all their lives and now are being told that they need at least a five percent deposit plus the ability to pay for LMI, stamp duty and other costs and they come up with nothing. This is a big deal if they’re buying in Sydney (where we’re based) as the deposit and costs could be around $120k on a $1M house.
Even if they are gifted the deposit, many are unable to service the loan as repayments on $950k are beyond their ability to repay.
When you become a finance broker that caters to retail borrowers, part of the accreditation process is to do a series of tests. The key knowledge that stuck in my mind from this process is that brokers must recommend a product that is not unsuitable to the client. In the case of the people that I’m referring to in this article, that product is no product at all. They should walk away from the transaction. That, for the would-be borrower, is advice rarely heeded.
In capital cities like Sydney, there appears to be this affliction with property ownership within the city or its surrounds. So bad is this affliction that we rarely think of alternatives.
As I said at the beginning of the article, I was in Orange. A wonderfully vibrant regional centre with much to offer the would be home owner. You could pick up a gem of a house in Orange for around $400k. That would be walking distance to the town centre with all its café’s, restaurants, pubs etc. The town also has great schools and (from what I saw) is very well serviced by modern conveniences like fast internet connectivity.
Indeed, the house that we occupied for three days had faster internet speeds than I do in Metro Sydney. As this article is not about Orange you can read about it here.
My point is that we have many regional cities like Orange which should be considered as an alternative but rarely are. People often cite a lack of employment – that’s a good reason not to consider moving however their current employment is unable to give them what they desire the most – a home. This irony is often lost on our would-be clients.