by Lisa Montgomery

TAKING FIRM FINANCIAL STEPS TO BREAK THE RENT CYCLE

Leading non-bank lender Resi Mortgage Corporation says aspiring homebuyers watching rates rise and feeling stuck in a holding pattern should ensure they’ve explored all the practical options which may help them find the additional financial traction they need to eventually break the rent cycle.

Resi’s CEO, Lisa Montgomery says for many of these people, a re-assessment of their original strategy is all they may need to reinvigorate their hopes of home ownership - albeit via a slightly different path.

She says: “The core strategy for most would-be property owners is to save as much money as they can to put towards a deposit on a place they can either live in or rent out as an investment. But it’s how they approach that saving that can make a significant difference in bringing that timeline forward.”

Montgomery says people who pay rent and see it as ‘dead money’ could consider the following strategies to try and fast-track their financial plans:

Take in another tenant to cut down costs
If your lease allows for it and the circumstances are appropriate, this option may suit singles that have the ability to take in another tenant or a trusted friend or family member to help share living costs – thereby allowing you to redirect the rent you save into a savings account instead.

Consider whether you could purchase with a family member
If you have a close family member such as a sibling that shares your level of financial discipline and long term commitment, consider whether you could pool your savings and purchase together. If this is a possibility for you, you do however need to be realistic and practical by ensuring you’re both well aware of all your legal and financial obligations to the property and each other by signing all the appropriate documentation so that if either of your circumstances or plans change, one person isn’t left in the lurch.

Invest, rather than owner-occupy first
For families and singles who want to owner occupy, it may be worth re-assessing that plan so that you instead purchase a lower priced investment property first - and use that as a financial stepping stone to eventually purchase a home of your own. This may be the solution for some who remain committed to their goal but can see the benefits of financially crawling before they walk.

Live back home with mum and dad
Despite wanting to assert your independence by moving out of the family home, the reality is it’s expensive if you’re also trying to save for a property of your own. But if you can reach an agreement with your family and circumstances allow for it, why not live in the family home for a few more years longer and save that much needed cash you need for a deposit.  It’s now such a common trend for families who are often cash strapped themselves to help in whatever non-financial way they can to support their children in their dream of home ownership. And as long as you respect what they’re doing for you and you agree to their financial and social expectations, it can end up providing more security for everyone.

Take a second job to save more
Taking a second job to get ahead was a common option for many baby boomers and one that’s now coming back into vogue. Yes, you may pay some more tax but if you take the time to have a good look around there are a surprising number of jobs that are flexible, seasonal and enjoyable as well – and if you knuckle down for a dedicated period of time, it can allow you to reach your financial goal sooner.

Discretionary Detox
This is all about cutting down in any areas which impact your discretionary spending such as staying in instead of going out, walking or getting public transport to work instead of driving, keeping holiday plans simple and within budget and being more aware of ‘needs’ versus ‘wants’ before you purchase anything.

Look at your Credit Habit
If you already have credit cards and can’t pay off the outstanding balance when it’s due, this is a key problem you need to address before you even think you’re capable of borrowing more for a property. Not only will lenders see this as a problem, but you must recognise it too and reassess how you generally behave with money before you start the journey of responsibility you need to buy a place of your own.


ENDS

Media Contact:    Lisa Montgomery, CEO,
RESI Mortgage Corporation: (02) 8204 5012 or 0414 592 553

Karen Bristow - Kardan Consulting: 02 9967 3245


Published on: 1/08/2010

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