Met a lovely starry-eyed couple who’d bought an Apartment 18 months ago after saving for years. They believed the spin and pressure from their parents (experts of course – 4 people, 2 couples who between them over a period of 30 years had bought exactly TWO properties!). They’d been to try and refinance and had come to the coffee shop for some caffeine to steady their nerves – they should’ve gone to the Pub.
Here’s the deal. Apartment $450,000.00. Hard saved deposit of $45,000.00. Stamp Duty of about $16,000.00 they said which sounds about right. Registration and legals fees of about $2,000.00 and the dreaded Lenders Mortgage Insurance of about $8,000.00 which again, sounded about right. Their immediate OUT OF POCKET was therefore some $62,000.00 which they didn’t have so Mums and Dads chipped in (adding to their debt). Loan repayments had actually dropped a little from about $2,350.00 a month to $2,220.00 as interest rate cuts took effect.
They’re not very good with their money it seemed, as their credit card debt had ballooned (buying shit they really didn’t need). NOTE TO SELF – It never ceases to amaze me how much personal information people will share with a perfect stranger once they realise you are a. a real estate blogger, b. a licensed real estate agent, and c. have no interest in selling them anything.
Their parents (Bless them they of good intentions but no expertise) advised our wayward couple to just ‘re-finance’, pay off the credit cards and live happily ever after. Didn’t this kind of thinking get the World in the mess we find it today? Oh well. Our hapless couple toddled off to various Banks and Brokers and had just come from the last one where they’d paid to have a proper Valuer make an assessment of their Apartment’s value. I’d already brought up a recent list of re-sales and thought it looked bad so what they told me didn’t come as any sort of surprise.
Their loan with Suck-the-Marrow-from-my-Bones Bank was now what we describe as ‘under water’. What’s that old saying – ‘Never ask a question you don’t already know the answer to’.
WHOOPS. The Valuer, as they do nowadays, looked at recent sales, subtracted (what I thought) a reasonable downside margin and said $385,000.00. The loan is still at $404,000.00. DOUBLE WHOOPS!
Oh dear. This is a story being repeated all too often across the country. Unreported.