Preparing yourself for debt: 10 things to do now to make home ownership easier

Jennifer DukeAugust 28, 2014

Taking on a substantial amount of debt can be concerning, and rightly so – the added responsibility and requirements mean that you need to ensure you can always service your repayments or fear losing your home.

All being said and done, you do not need to enter into home ownership blind.

Here are 10 things you can do to prepare yourself for the debt and responsibility ahead:

  • Find out what your repayments may be

If you’re still looking for a property, then get onto your bank’s calculator and estimate how much your repayments are going to be. Be honest with yourself about what you can afford and have a look at what you’ll be expected to pay.

Having a clear understanding of what owning a property means financially for you day in, day out is crucial.

  • Have a budget plan

Now that you are away of the amount of funds required for your repayments, you can work out a debt management plan (here’s a good tool from Money Help), or a ‘budget’ that will ensure you can keep track of your outgoings. You may already have a good budget in place if you’ve been spending time saving for your deposit, so now you want to double check that it covers you enough.

  • Practice paying your mortgage

If you know how much your loan repayment is likely to be, and your budget plan, then it’s time for you to practice what it would be like to pay it each fortnight or month. For instance, if the amount you’ll be required to pay is $350 a week, and your rent is currently $300 a week, see how you handle putting aside the extra $50.

If you’re living with your parents and not paying rent, or paying far less than your upcoming repayments, this becomes even more critical.

Property Observer recommends factoring in other costs, such as strata fees and rates, so you can really see how you’ll handle those costs. Make it a habit before you even get your property. If it means you’ll never be able to eat out socially, and this is a nightmare for you, then you need to come up with a different plan. Remember, this is paying off the bare minimum – most people will want to pay off more.

  • Factor in a rate increase

You’ve practiced paying off your repayments as they’ll be when you own, but if you’re not on a fixed rather then you will need to ensure you can afford to keep paying in the event of a rate increase. Factor in up to an extra 2% on top of your current interest rate, and check whether or not this affects your ability to pay.

  • Ensure you know how much debt is too much

Now that you know how much you can personally afford to pay for your loan, and your own habits and ability to pay it on time and in the full amount, be honest with yourself. This is a personal situation, and will be a different answer for every prospective property buyer.

Ask yourself these four questions:

  1. Can I afford to do this for the length of the loan term?

  2. How can I stop myself from continuing any bad financial habits?

  3. What is my “tipping point” (the amount where you stop being able to afford the repayments)?

  4. What parts of my lifestyle, if any, am I willing to sacrifice to keep up with the repayments?

Article continues on the next page. Please click below.


  • Familiarise yourself with what to do if you miss a payment

If you do miss a repayment or find yourself suddenly struggling with hardship, then there are certainly things you can do. Here’s some information to assist you with understanding what to do if you get into this situation.

  • Get income protection and necessary insurances

Do not wait until you own the property to take out insurances on your income. If you fall sick and are unable to pay your mortgage and associated bills, you will find yourself struggling. Research and get the required insurances early in the piece.

  • Chat with a broker

Find yourself a good broker, and start talking about your options when it comes to mortgages and other home loan products. Understand what an offset account is, what LVR means and whether or not you’ll need LMI. You want to know how the frequency of repayments affects your overall loan, any associated costs and the limits to the product you’re choosing. Here’s how to pick the best mortgage broker to get you started.

The more you know now, the better prepared you will be later on - make sure you understand the requirements of your loan product and exactly what you're signing up for.

  • Find out how other people are implicated

Yes, if you miss your mortgage repayments then you will be the one facing off against the lender. However, if you are sharing the repayments in a joint venture, have someone standing guarantor, or are buying on behalf of your family then it’s time to be honest with yourself.

How badly can things work out if you default? Could your parents lose their home? You need to prepare for the worst eventuality, and ensure those involved know that there is a possibility, even a small one, of this happening.

Be upfront, have the required paperwork, and understand expectations. For instance, in a joint venture where one person has stumped up the entire deposit, will you both be paying equal amounts of the mortgage? Do you own exactly equally? Answer these questions before you get to the property ownership stage.

  • Get your documents together

You’re going to need quite a few documents to apply for your home loan, and now is the time to get everything in order.

Read through the requirements with the lender of your choice, however the majority of the time you will need identification, proof of earning and details about the property itself.

Make sure you know that your credit record is clean. Make sure you know what pre-approval is, and that you understand its limitations.

You can read Property Observer’s guide on getting your first loan here.

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

Editor's Picks

First look: MADE Property doubles down in Kirribilli new apartment market
Spyre Group brings successful Queensland blueprint to Melbourne with Hampton Ltd
Saxon Street by Milieu to bring new housing and urban design to Brunswick’s cultural core
Construction begins at Fishermans Bend Innovation Precinct
Gurner reveals new plans for final Jam Factory stage

Related Projects

16-22 Maud Street, Newstead QLD 4006
16-22 Maud Street, Newstead QLD 4006
16-22 Maud Street, Newstead QLD 4006
Price
Contact agent
35-37 Mount Street, Prahran VIC 3181
35-37 Mount Street, Prahran VIC 3181
35-37 Mount Street, Prahran VIC 3181
Price
Contact agent
118-124 Benelong Road, Cremorne NSW 2090
118-124 Benelong Road, Cremorne NSW 2090
118-124 Benelong Road, Cremorne NSW 2090
Price
Contact agent
118-120 Matthew Flinders Drive, Cooee Bay QLD 4703
118-120 Matthew Flinders Drive, Cooee Bay QLD 4703
118-120 Matthew Flinders Drive, Cooee Bay QLD 4703
Price
Contact agent
26-62 Kinross Road, Thornlands QLD 4164
26-62 Kinross Road, Thornlands QLD 4164
26-62 Kinross Road, Thornlands QLD 4164
Price
Contact agent
9-11 Baroonba Street, Whitebridge NSW 2290
9-11 Baroonba Street, Whitebridge NSW 2290
9-11 Baroonba Street, Whitebridge NSW 2290
Price
Contact agent
18 Ransley Street, Penrith NSW 2750
Perle, East Side Quarter, Penrith - 18 Ransley Street, Penrith
18 Ransley Street, Penrith NSW 2750
Price
Contact agent
Ernest Cavanagh Street, Gungahlin ACT 2912
Raya, Gungahlin - Ernest Cavanagh Street, Gungahlin
Ernest Cavanagh Street, Gungahlin ACT 2912
Price
Contact agent
39 Browning Street, South Brisbane QLD 4101
39-41 Browning Street, South Brisbane - 39 Browning Street, South Brisbane
39 Browning Street, South Brisbane QLD 4101
Price
Contact agent
675 Gardeners Road, Mascot NSW 2020
Kiara North, Mascot - 675 Gardeners Road, Mascot
675 Gardeners Road, Mascot NSW 2020
Price
Contact agent
187 Salvado Road, Jolimont WA 6014
Jolie, Jolimont - 187 Salvado Road, Jolimont
187 Salvado Road, Jolimont WA 6014
Price
Contact agent
47 Maning Avenue, Sandy Bay TAS 7005
Grace Residences - 47 Maning Avenue, Sandy Bay
47 Maning Avenue, Sandy Bay TAS 7005
Price
Contact agent
Cove Lane, Narooma NSW 2546
Cove, Narooma - Cove Lane, Narooma
Cove Lane, Narooma NSW 2546
Price
Contact agent
52-56 Ramsay Street, Five Dock NSW 2046
Ava, Five Dock - 52-56 Ramsay Street, Five Dock
52-56 Ramsay Street, Five Dock NSW 2046
Price
Contact agent
2375 Gold Coast Highway, Mermaid Beach QLD 4218
The Alfred - 2375 Gold Coast Highway, Mermaid Beach
2375 Gold Coast Highway, Mermaid Beach QLD 4218
Price
Contact agent
129-131 Russell Ave, Dolls Point NSW 2219
ALLURE COLLECTION - 129-131 Russell Ave, Dolls Point
129-131 Russell Ave, Dolls Point NSW 2219
Price
Contact agent
62 Constitution Avenue, Parkes ACT 2600
The Eastbourne on Commonwealth Park - 62 Constitution Avenue, Parkes
62 Constitution Avenue, Parkes ACT 2600
Price
Contact agent
155 Old Burleigh Road, Broadbeach QLD 4218
Sandpiper, Broadbeach - 155 Old Burleigh Road, Broadbeach
155 Old Burleigh Road, Broadbeach QLD 4218
Price
Contact agent
33 Vulture Street, West End QLD 4101
33 Vulture Street, West End QLD 4101
33 Vulture Street, West End QLD 4101
Price
Contact agent
19 Governor Terrace, Murarrie QLD 4172
Park Hill Village Collection, Murarrie - 19 Governor Terrace, Murarrie
19 Governor Terrace, Murarrie QLD 4172
Price
Contact agent
122 Marine Parade, Miami QLD 4220
Nalu, Miami - 122 Marine Parade, Miami
122 Marine Parade, Miami QLD 4220
Price
Contact agent
34 Jacaranda Place, Indooroopilly QLD 4068
34 Jacaranda Place, Indooroopilly QLD 4068
34 Jacaranda Place, Indooroopilly QLD 4068
Price
Contact agent
167 Old Burleigh Road, Broadbeach QLD 4218
167 Old Burleigh Road, Broadbeach QLD 4218
167 Old Burleigh Road, Broadbeach QLD 4218
Price
Contact agent
21 Queens Way, Yeerongpilly QLD 4105
Yeerongpilly Green - 21 Queens Way, Yeerongpilly
21 Queens Way, Yeerongpilly QLD 4105
Price
Contact agent
445-449 River St, Ballina NSW 2478
Solhaven - 445-449 River St, Ballina
445-449 River St, Ballina NSW 2478
Price
Contact agent
52 Sunset Boulevard, Surfers Paradise QLD 4217
52 Sunset Boulevard, Surfers Paradise QLD 4217
52 Sunset Boulevard, Surfers Paradise QLD 4217
Price
Contact agent
6 Jack Brabham Drive, Hurstville NSW
Horizon Hurstville - 6 Jack Brabham Drive, Hurstville
6 Jack Brabham Drive, Hurstville NSW
Price
Contact agent
49 Seena Drive, Edgeworth NSW 2285
49 Seena Drive, Edgeworth NSW 2285
49 Seena Drive, Edgeworth NSW 2285
Price
Contact agent
Lot 118 Ocean Steamers Road, Port Adelaide SA 5015
Lot 118 Ocean Steamers Road, Port Adelaide SA 5015
Lot 118 Ocean Steamers Road, Port Adelaide SA 5015
Price
Contact agent
203 Ashmore Road, Benowa QLD 4217
203 Ashmore Road, Benowa QLD 4217
203 Ashmore Road, Benowa QLD 4217
Price
Contact agent
774 Ripley Road, Ripley QLD 4306
774 Ripley Road, Ripley QLD 4306
774 Ripley Road, Ripley QLD 4306
Price
Contact agent
6 Homelea Court, Rivervale WA 6103
6 Homelea Court, Rivervale WA 6103
6 Homelea Court, Rivervale WA 6103
Price
Contact agent
7002 Ripley Road, Ripley QLD 4306
7002 Ripley Road, Ripley QLD 4306
7002 Ripley Road, Ripley QLD 4306
Price
Contact agent
3 Delos Way, Sorrento WA 6020
3 Delos Way, Sorrento WA 6020
3 Delos Way, Sorrento WA 6020
Price
Contact agent
77 Sutton Street, Redcliffe QLD 4020
77 Sutton Street, Redcliffe QLD 4020
77 Sutton Street, Redcliffe QLD 4020
Price
Contact agent
119 Queen Street & 86 King Street, Bendigo VIC 3550
119 Queen Street & 86 King Street, Bendigo VIC 3550
119 Queen Street & 86 King Street, Bendigo VIC 3550
Price
Contact agent
181 Prospect Road, Prospect SA 5082
181 Prospect Road, Prospect SA 5082
181 Prospect Road, Prospect SA 5082
Price
Contact agent
593-595 Albany Highway, Victoria Park WA 6100
593-595 Albany Highway, Victoria Park WA 6100
593-595 Albany Highway, Victoria Park WA 6100
Price
Contact agent
1-28, 40 Civic Way, Rouse Hill NSW 2155
1-28, 40 Civic Way, Rouse Hill NSW 2155
1-28, 40 Civic Way, Rouse Hill NSW 2155
Price
Contact agent
93-97 Bay Street, Brighton VIC 3186
93-97 Bay Street, Brighton VIC 3186
93-97 Bay Street, Brighton VIC 3186
Price
Contact agent
22-38 & 27-31 The Avenue, Coburg VIC 3058
22-38 & 27-31 The Avenue, Coburg VIC 3058
22-38 & 27-31 The Avenue, Coburg VIC 3058
Price
Contact agent
1F Ashline Street, Wollert VIC 3750
1F Ashline Street, Wollert VIC 3750
1F Ashline Street, Wollert VIC 3750
Price
Contact agent
Lots 100 & 900 Kentucky Court, Cockburn Central WA 6164
Lots 100 & 900 Kentucky Court, Cockburn Central WA 6164
Lots 100 & 900 Kentucky Court, Cockburn Central WA 6164
Price
Contact agent
1260-1272 Malvern Road, Malvern VIC 3144
1260-1272 Malvern Road, Malvern VIC 3144
1260-1272 Malvern Road, Malvern VIC 3144
Price
Contact agent
472 Regency Road, Prospect SA 5082
472 Regency Road, Prospect SA 5082
472 Regency Road, Prospect SA 5082
Price
Contact agent
273A Gorge Road, Paradise SA 5075
273 Gorge Road, Paradise SA 5075 - 273A Gorge Road, Paradise
273A Gorge Road, Paradise SA 5075
Price
Contact agent
270 The Esplanade, Miami QLD 4220
270 The Esplanade, Miami QLD 4220
270 The Esplanade, Miami QLD 4220
Price
Contact agent
2 & 6 Austral Parade, East Bunbury WA 6230
2 & 6 Austral Parade, East Bunbury WA 6230
2 & 6 Austral Parade, East Bunbury WA 6230
Price
Contact agent
5 Charles Street, Charlestown NSW 2290
5 Charles Street, Charlestown NSW 2290
5 Charles Street, Charlestown NSW 2290
Price
Contact agent
59 & 69 Merthyr Road, New Farm QLD 4005
59 & 69 Merthyr Road, New Farm QLD 4005
59 & 69 Merthyr Road, New Farm QLD 4005
Price
Contact agent