Tuesday, October 6, 2009

Mortgages, Ownership and Interest Rates

The news today is saying that interest rates are going up on mortgages. I see people are already panicking about this.

They curse the banks, they seem to think that it’s the banks fault they are struggling with their repayments. People look for others to blame for their problems.

Here is my story:-

**Purchased first home November 1987. A 10sq 1970’s brick house, close to amenities and schools, ripe for renovation and new carpet and paint
· Interest rates 17-18%
· Paid off March 1990
· We went without new cars, we went without new furniture, we went without renovations, we went without dining out, we went without entertainment.

**Purchased second home June 1996. A 8sq 1930’s weatherboard house, miles from anywhere with 5 acres attached. Or what is known in the industry as a ‘Renovators Delight’
· Interest Rates 5-9%
· Still paying off, but there has been illness and accidents
· We lived in the old house for 7 years, whilst saving and collecting for the ‘new’ house. We still did without new cars, new furniture, dining out and entertainment and had two children to support.

Now you are sitting back and saying that we suffered, that we did it too hard. That we must have had parents help, that we must have good paying jobs. Ummm sorry to shoot you down, but we had none of that. If fact we were 19yo and 23yo. No university degrees, no qualifications, nothing other than the desire to move ahead in life and do it with minimal distress.

What I am trying to impress upon my readers is that – to move into the ‘best’ suburb, to move into the ‘’best’ house in the ‘best’ street , may not actually be in your ‘best’ interests.

I will be able to when I am 50yo sit back and not have to worry about where the next rent payment is coming from, not have to worry about the where the next mortgage payment is coming from. Everything should be paid off soon.

You can’t have your cake and eat it too.

You must make your biggest life purchase, with the thought in the back of your mind, what happens if something goes wrong? What happens if there is a car accident? What happens if we accidentally become a family?

Life is interesting, life is fun, life is also unpredictable and you must be prepared.

There is no way possible that we would have been able to achieve what we did without finance. But we approached the idea of finance with the respect it deserves.

Be the interest rates of 5% or 17% you must be able to afford the worst case scenario. If you are unable to afford them, then perhaps you need to consider selling and moving into something smaller. Or starting again, using the period that you were paying the mortgage as a period in your life you lived rent-free.

We now can go out to the occasional dinner, the occasional movie, we even bought a new car or two. But we looked at each major purchase and the ramifications of each purchase before purchasing.

Many people think that money comes easily.

Money does not grow on trees. It grows through hard work and respect.

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