got a bit of a pickle! i dont know how to advise my friends (well, they are family members) about purchasing their first home. i am so new to all of this so i dont pretend that i know everything about real estate and investing ….. but the whole situation they are getting themselves into just stinks of a timebomb.
they are a young family – she is 21, he is 23. just got married. they have three kids aged under 3. she doesnt work and refuses to work because she says that a mum's place is in the home and that if u work while having young kids you are dodging your duties (sooo closed minded as u can tell!).
he works in retail at a clothes store for something int he $40ks. he always quits his jobs. he never lasts more than 3 to 6 months in a job before he quits and goes somewhere else. grass is always greener on the other side. he wants to earn big $ but do no work. he is on the road to a big wakeup call.
so thats all their income, the $40k plus centrelink benefits. they get rent assistance.
and now they are telling me that they are getting a block of land and building a house – hello first home buyers grant!!!!! the place they are wanting to buy has house and land packages ranging from $355k for the cheapest, up to $400+.
i just really really really think that this is a bad idea. i dont see how they could afford the repayments with the interest rates the way they are now …. never mind when they jump up to 8%+
they have no savings and are always telling me they are broke. at the end of each week they have completely cleared out their bank accounts. i dont know how they are getting a deposit. i didnt want to ask lots of questions because the man of the house can get quite defensive when ppl question them about finances. i didnt want to step on toes when its not my business.
im just worried because they are family and my little neices and nephews will be affected if they do the wrong thing.
is there a way i can delicately advice them of the implications of when the interest rates rise? should i just butt out cos its none of my business? i feel like i should butt out, but they have done no research and are just driven by the promise of free money. if it all goes pear shaped then i would feel bad for not at least bringing it up to them.
Butt out.
chances are they won't get the money.
If they do get the money and it is a disaster they will learn a valuable lesson.
they are young enough to recover from this mistake.
You won't win any friends by interfering. I know that you want to help, but sometimes people just have to learn their own lessons. It would be different if they had asked your advice, which it doesn't sound like they have.
If you just HAVE to say something, make it indirect and not about them. Make it about you somehow, and bring it up in conversation. "I don't know how I'm going to afford my repayments when interest rates go up like they are expected to do…" , "did you see that thing on Today Tonight the other week where they were saying it cost no more to buy in some areas than it did to rent – they are so useless on that show, they didn't count rates and insurance and R&M which cost me $x thousand dollars a year", "Gee I'm glad that I fixed my interest rate for 5 years, now at least I know what my repayments will be and don't have to worry about the rates going up…"
If you don't already own property yourself then you can change these things to "I want to buy but I'm scared that the market will crash when the FHOG finishes…." etc etc.
good luck
always best to keep your nose out of other people business.
What if you give the wrong advice?
Try not to judge others too much. Plenty of people live hand to mouth, day to day but still manage to meet their obligations. Sometimes have an obligation like a mortgage is the best thing for people as it forces them to do something good with their money.From what I have read, they will lose their rental assistance if they buy a home. Something that they need to be aware of. I wouldnt see that as interfering, simply advising them of the facts.
its my husband's brother and his wife – so hubby wanted me to say something.
however – i found out today that he has had his hours cut back. he is now only working 15 hours a week! phew if that had happened a month from now he woulda been up the creak. i feel sorry for him though that he has only 15 hours. that would suck majorly.
at least he has avoided the crisis of paying a mortgage on a casual income.
You should back off.
You could advise them to go to a lender first and get a loan appraisal to have their finances in order first so they are aware of any financial limitations on what they can afford before they commit to a contract they may not be able to afford.
This will bring them to blame the lender rather than you for being given the real facts on how much they can borrow.One thing they may need to wary of is some developers pay money to lower the repayment for a set time period.
In the fine print the loan reverts to a variable loan after the time period and so the repayment amount increases accordingly.Scary stuff. Australia could yet have its own "subprime" crisis.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
