The psychology of home buying

BUYING a property is an exciting, nerve-wracking roller-coaster ride of emotions.

Buying a property is an exciting, nerve-wracking roller-coaster ride of emotions. It can be one of the most inspired moves you’ve ever made – while at the same time being the most stressful.

Some individuals see home-ownership as a statement of independence; couples view it as the start of a lifetime together. Others believe having their own home is the realisation of an Australian dream, or the first building block of future security.

But before you can kick off your shoes in your own lounge-room and pat yourself on the back, you need to negotiate your way through potential stressors in real estate and finance.

First, absorb advice from as many reputable sources as possible. Allow yourself to consider a wide range of eventualities and think about how you would react.

Short-circuit any potential for buyers’ remorse. Is it more important to you to have a large home with a big backyard, or to reduce your commuting time to work? Building a new home adds additional stress. Is your family or relationship capable of weathering those tensions at this time?

Think about the community you’ll be joining. Is it right for you? Is it far from family and friends? Social factors have an enormous impact on your happiness and quality of life.

Ask your home-owning friends and family whether, in hindsight, they would have made different decisions or changed priorities on their wish-lists and must-haves.

Ask for references for building and pest inspectors, as well as surveyors and town planning advice if you think you need it. Word of mouth can prove invaluable, whether it helps you choose a business or steer well away from it.

Familiarise yourself with every step of what’s involved in buying a house, from real estate and building terms to contracts, mortgages, budgeting and scams.

Financial Counselling Australia’s (FCA) Queensland Chair Jan Perkins advises property-buyers to seek advice, know their values and spending habits and don’t delay in asking for help if things start to go awry.

“Financial counsellors provide information, support, advice and advocacy to assist people in difficulty and also to provide advice on financial literacy and education, improving your money management skills in case of crisis or if you hit a bump financially,” Perkins says.

“We’re not financial planners. We don’t promote or sell products. We’re holistic in looking at what has brought you to this crisis, your values, your attitude, the whole person.”

The FCA website is another trove of information to help you avoid the stress of a financial crisis or to navigate your way out if you do find yourself in trouble. Their counsellors are free, independent and confidential and you can talk to them in person, online or by phone. They can also refer you to free and subsidised legal help.

Counsellors can help you find hardship assistance if you run into difficulties repaying your home loan, but recommend saving yourself the stress with thorough planning.

“You could have a reduced income, loss of employment or retrenchment, ill health or trauma,” Perkins says. “There could be a natural disaster, mental health issues could occur, or domestic violence or drug or alcohol addiction. It really doesn’t take long to put you into mortgage stress.”

Take precautions with a realistic household budget that takes into account your personality and spending patterns and includes an emergency fund to cover the unexpected.

Careful planning at the start of the journey is also key – make use of online calculators such as those found on Suncorp’s Home Buying Guide to ensure you have a realistic idea of costs and repayments.

“It is the Australian dream, owning your own home,” Perkins says. “It’s also about the security of not renting.

“For couples, I think it’s really important that you have an allowance so you each have your own money to spend, but you are committed to this budget and mortgage repayments. Factor in credit card repayments, store credit cards and appliance leases.”

Investors can find themselves in mortgage stress when their rental property sits vacant for a time. This happens when, for example, a mining boom in a regional town triggers a housing boom – which becomes unsustainable when a mine closes or is scaled down.

Lender’s mortgage insurance only covers the lender, Perkins warns. Whether you sell the property to repay your debt, or whether the lender sells it, you could be left with a financial burden.

“There could be a shortfall of, say, $60,000 between what the home sells for and what you owe,” she says. “As financial counsellors we are holistic. We look at the client and help them reach their financial goals.”

The Wall Street Journal points out that a home comes with more emotional weight than any other investment we make. It becomes a part of our souls and an extension of us. Our homes become intrinsic to our lives, our future memories and our children’s childhoods. The right home will become a refuge and a financial security. The wrong one can become a source of stress, financially and in relationships.

Choose wisely.

Originally published as The psychology of home buying