The ultimate price of a big home.
 
by Neil Jenman

It won't be long before a television program takes us live to the scene of a home eviction. It will be the property equivalent of a public execution.

Here's what happens at an eviction…

A date and a time is set for the eviction. About half an hour before the set time, uniformed officers (sheriffs) arrive; sometimes the police are there (especially if a struggle is expected). A locksmith turns up.

If all goes smoothly, a few minutes before the appointed time, a family will emerge from the home – a father, a mother and one or two children; perhaps, also, a baby.

Okay, that's enough, you get the picture – and it's something you never want to let happen to you or anyone you know.

So, how can you avoid the saddest sale of all?

First, prevention.

The best way to avoid being evicted from your home is to never get yourself in a position where you can be evicted. And that means asking the most important question you can ever ask BEFORE you sign a house contract or any loan documents – 'What's the worst that could happen to us?'

If one of you lost your job, how long could you last?

If interest rates increased by four per cent (yes, FOUR per cent) could you still afford the payments?

Have you allowed at least two per cent of the price of the property for annual expenses (a home costing $500,000 can easily chew up $10,000 a year in expenses on top of the loan payments).

What if you have [more] children?

What if you get sick?

If the answer to any of these questions makes you uneasy, do NOT buy the home. Or, at the very least, find a cheaper home in a cheaper area.

Be smart – forget about buying what you want and focus on buying what you need.

How many bedrooms can you sleep in at once? How many places do you need to eat – at the kitchen bench, in the family room, in the rumpus room, in the dining room, on the balcony or perhaps in the entertaining area?

Are you getting the idea? Can you see the madness of modern living? We buy homes with rooms we don't need and that we can't possible use (at the same time). And for this we place ourselves in danger of being evicted – one day.

Don't risk it, buy a cheaper home. Or rent.

Second, retraction, retreat or rescue – call it what you want.

If you've bought a property, signed up for a loan and you're struggling, what do you do?

Most importantly, don't fight with your partner no matter whose fault it may be. It's bad enough to have financial worries, but worse to let money hurt your relationship. If you want to save your home, make a pact with your partner that you will fight to do so.

There are only three ways to reduce the stress of mortgage payments: First, you can increase your income – either by [asking for!] a pay rise, taking a second job or getting a better paying job. Yes, it might be hard work but it won't last long (a few years perhaps) and then you'll be financially safe.

Second, you can decrease your expenses. Every day we hear about food diets, how about a spending diet?

The respected (New Zealand) financial expert, Martin Hawes, suggests that, in order to change spending habits, people should have a 'zero-spend-week'. At the start of the week, fill the car with petrol, stock up with groceries (as if a cyclone is coming) and then, for seven days, spend nothing. It's not easy, but it sure helps you realise what's possible with a bit of willpower.

Another way to cut expenses is to approach your lender and ask for a better deal. So often we see companies advertising special deals for new customers. If pressured (or shamed) the same deals can be given to existing customers. If not, consider the cost of changing, it may be cheaper.

The third way to remove the stress of mortgage payments is to get rid of the mortgage. Sell the property. Okay, you lose your home, but at least you control the sale.

The worst possible way for a home to be sold is through a repossession sale.

Once those sheriffs have turned up and the locks are changed, the next thing is the 'mortgagee sale', which usually means an auction. And, as everyone-in-the-know knows, auctions get much lower prices.

The last thing you ever want to happen to you is an eviction execution.

When you head out to buy a home, set your sights low not high. Buy a smaller home not a bigger home. Choose a modest or even a cheap area not a swanky or trendy area which costs twice as much for something half as good.

The agents who spin the standard lines to persuade you to buy are not going to pay your mortgage payments. But, if things get tough for you, the same agents, like vultures, will be back to pick over your financial carcass.

People who buy big expensive homes with big expensive mortgages seldom realise that the biggest price comes after they buy.

Living in the shadow of an eviction execution is too high a price to pay.

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Are you struggling with mortgage payments and want to discuss it? Or, do you know anyone who's struggling? If so, please call 1800 1800 18 or email us.