Feeling pressured to impress your friends with a big house? You’re not alone

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on November 25th, 2021       

Fact checked

At Savvy, we are committed to providing accurate information. Our content undergoes a rigorous process of fact-checking before it is published. Learn more about our editorial policy.

Statistics outline that one in five Australians feels compelled to purchase an imposing, big house, to keep up with the competition within their group of friends. That’s a reality pointed by a survey conducted by Finder.com.au.

According to the survey, one out of ten individuals constantly worries that he/she cannot keep up with friends’ living conditions, particularly when it comes to house ownership. On that account, we would like to encourage Aussies not to base their home purchasing plans on their friends’ financial position, unless they want to risk paying an enormous debt for many years to come. Don’t worry; this article isn’t meant as a lecture, but it’s supposed to be informative, particularly for first-time home buyers. Here are five things you should take into consideration:

1. Rely on a higher budget than the current interest rates

At the moment, interest rates are genuinely attractive. However, before considering a particular loan, specialists encourage Australians to calculate their home budget by adding almost 2 percent to it as compared to their current cash rate. That is helpful in guarding you in the case of unexpected growths in interest rate, which are due to emerge down the road – that’s absolutely inevitable.

2. Obtain an estimation of the amount of money you afford to borrow

A borrowing calculator plays an essential role in determining how much money you can afford to borrow. Typically, one should decide on a loan budget, anticipating the changes in income that may eventually emerge. Hence, the first step you should consider is a budget calculation. For starters, you should determine the part of your income that you could direct towards purchasing a property. And secondly, you need to calculate the required mortgage repayments for the amount of loan you pay on a regular basis.

3. Consider home loan market growth

The home loan market has experienced a noticeable growth in previous years. That is good news, particularly for first-time homeowners, but it may be a source of confusion as well. Therefore, remember to be patient, and take the time to compare distinctive home loan variables before signing a contract. Such an important decision as house purchasing requires time and plenty of information.

4. Economic factors

The future is filled with uncertainty, mainly because jobs aren’t as set in stone as they were in the past. It goes without saying that we cannot rely on the annual bonus or potential salary increase to pay for the loan debt. Alternatively, home loaners shouldn’t take into consideration these occasional bonuses as a foundation for their income.

5. Avoid taking the maximum loan amount

Even though the lender may present you with the alternative of borrowing a large sum of money, you shouldn’t proceed to take the amount available on the spot. Alternatively, focus your attention towards your current budget, what you can afford, and decide on a lower amount of money than the maximum available. Pay thorough attention to your repayment terms, as well.

Easily compare home loan options today

We compare home loan options for you so you can be assured you’re seeing the most competitive interest rates available in Australia.