Oh hey there Fierce Girls. Been a while, I know. Was having a low-key life review. I mean, who doesn’t want to pull their life apart after three months in lockdown?
On the upside, I got a puppy. Meet Dotty the Pomeranian. She is the light of my life.
On the downside, I decided I wanted more green space and less city living. I actually blame my folks for this, because they let me live in their beautiful mountains home for lockdown, and I got spoiled by all the nature.
So, I came back and thought ‘hey, let’s sell out of the inner-city and move to the beach!’
Even though I’ve only owned my place for four years. Even though city apartments haven’t really appreciated in price while beachside homes have gone nuts. Even though I’ve spent tens of thousands of dollars renovating this place so it’s perfect. And even though 80% of my friends live within 15 minutes of me.
Despite all of this, I put my place on the market. Spent thousands on marketing costs, spent hours making it look beautiful, and spent time looking at overpriced properties at the beach.
And then … it all felt wrong. I pulled the pin on everything. Decided to stay put – and all of sudden I remembered how much I love living here. Well duh.
Anyway, I actually learnt a few things from this expensive little foray into major life changes. Maybe you can learn from my mistakes. Here goes:
Check your credit score regularly – and before you want credit
Can you believe I got knocked back for a home loan? I felt like shouting at the bank ‘Don’t you know who I am? I literally tell people how to be responsible with their money!’.
But they wouldn’t have cared, because the credit bureau is a hard taskmaster.
After downloading my credit report for free, turns out I have a fraudulent debt racked up in my name and put on my credit file. It’s not huge, but that doesn’t matter – it’s unpaid and means the bank won’t give me a loan.
It was sold to a debt collection firm back in 2018 – without my knowledge, since the address is somewhere in the Northern Territory. So I had to speak to the debt collectors, file a police report, sign a stat dec and send it all to them. Hopefully they will accept it as fraud and write it off, but then they have to tell Equifax, who then has to clear it from my file.
So, even if I wanted to buy a new place, I couldn’t just now. And this is despite the fact I have never missed a mortgage repayment, have equity to bring to the table, and have zero other debts – not even a sneaky Afterpay account!
And therein lies my issue. Because I don’t use credit, I never apply for it, and so I never realised that I was such a credit risk. And when I looked at my credit file, turns out the fraudsters have tried to apply for other stuff in my name (and been knocked back). So I’ll also be doing something to freeze my credit once this is sorted.
Long story short: make a habit of checking your credit score – which is a ‘lite’ version that flags any issues. And then if there are red flags, get your credit report, which has more details. There are a few rules around getting the full report for free, so you’ll need to see if you qualify.
Beware of property market FOMO
The thing about putting my place up for sale is that I was not 100% ready to do it. I just didn’t have the gut feeling that it was right. But the real estate agent told me how there was a wave of properties coming onto the market, and if I didn’t go now, there’d be more competition and lower prices and I’d miss out etc.
And so my fear and greed got the better of me. I took just days to think about it and then stumped up a bunch of money for marketing and lawyers.
And I knew it wasn’t right. Usually, once I’ve decided something, I feel good about it (e.g. getting a puppy). But this didn’t feel like that. It felt rushed and premature.
It’s because I gave into post-lockdown, property-market mania.
When the home-loan-rejection drama forced me to stop and wait, I realised that I was doing this all for the wrong reasons. So I pulled the plug and felt an enormous sense of relief.
Lesson is: don’t make major life decisions based on a fear of missing out.
When in doubt, run the numbers
When you are in the grip of market mania (whether it’s property, crypto, meme stocks or whatever), it is easy to get swept up.
Emotion is a poor financial adviser.
When in doubt about what course of action to take, cold hard numbers help.
Part of my issue was that I’ve only owned this place for four years. I paid around $25K stamp duty on it and a bunch more renovating it. If I bought a new, more expensive place, sure I could afford the loan. But I’d pay upwards of $30K in stamp duty again, plus more interest on a bigger loan and all those other pesky moving costs.
I had to remember my own good advice: just because you can afford something, doesn’t mean you should. Just because the bank will give you the money, doesn’t mean you should take it all. And just because interest rates are at historic lows now, doesn’t mean they will be over the life of a 25-year loan.
I guess that advice like this is easy to dispense and easy to follow … when you’re in a rational and well-considered frame of mind.
Less so when you are caught up in Sydney-property-mania and having a post-pandemic ‘moment’.
In this situation, cold hard numbers can be very calming, and they forced me to see that my decision-making was not really rational.
So, please learn from my mistakes. All of these lessons can be summed up as ‘trust your gut’. It’s usually right.