Monday, March 31, 2008

Why can't some people save for a house deposit?

It must be tough being a childless couple trying to buy a house these days. Especially when you`re earning $130,000 and can't even save 15 percent of that income towards a house deposit. Previously they were throwing "dead" money on rent, now they`re throwing even more" dead" money on interest payments and their loan could be worth more than their home for one reason: They didn`t save.

Heres a couple with a $120,000 income. They pay $900 a week to service a 375k mortgage.That's $48,600 a year. They have a 100 per cent loan because they couldnt save. And here is another couple on a similar income who say they can`t have kids because of their high mortgage.If they had saved just 40 per cent of their income, they could have had a 25 per cent deposit on their home in just two years.

Because they didn't save, they now have to spend more than half their income on mortgage payments.

I`d like to know this. Now they`re paying $48,000 a year on a mortgage, why couldn`t they save at least $500 a week for two years before spending $900 a week plus rates and insurance on a house. They`d then have a $52,000 deposit and much lower mortgage payments.


Blogger Steve Withers said...

The elephant under the bed will be the monthly interest overhead on their maxed-out credit cards. If you owe $20,000 on plastic, your monthly minimum payment will be about $500. Given their other overheads, they are likely on the plastic treadmill, unable to pay enough off to make any headway. It can takes years to pay off credit cards simply because the interest rates are SO high. Usually over 20%. That's a budget-blaster when your credit card burden is the size of a small mortgage. Having (over 15 years) accumulated over $50,000 on plastic a few years back, I know how cancerous this is. Those days are gone.

April 1, 2008 at 9:01 PM  

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