5 Lessons for Tenants Becoming Homeowners
“Rent is just money down the drain” howls your Uncle Derek at every family gathering. Between 3 choruses of “have you got a boyfriend yet”, the next pressing topic is always your ever-decreasing finances. As if your monthly credit card statement/student loan notice/stack of direct debits wasn’t enough of a smack in the face, luckily we humans have families to make you feel a little bit worse about your finances.
It seems that young people are berated for renting a little bit more every year they continue to do so. If you’re really lucky, you’ll get the extended remix of “you’re just paying someone else’s mortgage” – it’s a real banger lemme tell ya.
I should note here that sadly, Uncle Derek is right – rent is money down the drain, and you are paying someone else’s mortgage. But that’s not to say paying your own mortgage is any picnic. It’s important to learn these six lessons (read: heartbreaking realities) of what homeownership really means, and why you should think carefully before you buy.
Lesson 1: welcome to the world of owners corporations
Unless you’re a descendant of royalty or a premier league footballer, you’re probably facing the reality that your first home will be on a subdivision – by that I mean either an apartment, unit or a townhouse/villa on subdivided land. Basically any property that shares land with another property.
These properties are managed by an owners corporation, which is basically a little gang of all the owners, who sit down once a year and gab about whether or not the fences need painting and argue about the communal bins. It’s quite a hoot.
Anyway, when you buy into an owners corporation, you’ve got a responsibility to notify the committee of certain things – the details of which will be in your contract of sale. That’s the beefy document you sign when you buy.
What’s more, you’ll pay quarterly fees into a shared account, which pays for things like the aforementioned fences, and covers insurance of the building or shared areas.
Those fees are on top of your mortgage and you’ll be paying them for life, long after you’ve said ‘bye Felicia’ to your mortgage.
Lesson 2: surprise! Your boiler broke
As a tenant, you kind of have the right to swan around without a care in the world. You could walk into your property and find everything you own floating in sewerage and the ceiling caved in – all you’d need to do would be give your landlord or property manager a bell and basically ruin their day.
As a homeowner, everything is your problem. You have absolutely no control over when you might need to fork out for a new boiler, fix burst pipes or replace a broken fridge. This means your rainy day fund needs to be set aside for actual boring adult stuff and not when a rainy day translates to how much you rly rly miss Bali 2012 #throwbackthursday.
Lesson 3: hi hello wassup it’s the local council
Another divine ignorance you’re blessed with as a tenant is council rates. Sure, they’re sort of built into your rent, but you don’t have to face the actual pain of forking out a few hundred bucks a year for stuff like rubbish collection. Now that’s adulting at its finest.
Lesson 4: interest rates are suddenly very interesting
This one is a real heartbreaker. Please tell me I’m not alone in the idea that paying 4% interest on a home loan “doesn’t sound like that much”? It seems like such a small number, but buy the time you’ve paid it on your remaining balance every month for 30 years, it really fucking adds up.
Like, seriously adds up. If Uncle Derek thinks rent is money down the drain, take a look at our mortgage statement!
For really brutally honest context, for every $1700 we pay off our mortgage, about $1300 of that is interest. WHAT THE ACTUAL FUCK?
I talk more about interest rates here.
Lesson 5: do you have insurance maam?
Your next expense is insurance. Building, contents, landlord, mortgage, income – you can pretty much insure your own vagina when you own a property. The terrifying figure you spent on the damn home is usually enough to scare you into signing up for all of it, too, so just sit back and watch your money dance out your account every month with that all important ‘peace of mind’ the only thing you’re getting in return.
The issue with owning property is – you don’t actually own it. It’s a security against a fucking massive bank loan. So you want to insure it and you want to insure the income that pays it. You kiss goodbye to the luxury of being able to just call it quits as a tenant. The loan is entirely your responsibility, so even if disaster strikes (I mean real life actual disaster like death or illness), you’ve still got to come up with the money every month.
The Final Word
If this has terrified you, I’m sorry. Homeownership really is important, and of course it’s beneficial. These lessons are really just facts of life, which perhaps you’re more prepared for than I was. Just be careful of romanticising the idea of ‘buying’ and ‘getting on the ladder’. While it is an almost essential part of growth as an adult, it’s even more essential to make sure the time is right for you.