Before Luke Abraham and his now wife, Carly, bought their first home they put themselves on a training regime.

At that time Luke was paying about $100 a week in board and Carly was living at home rent-free. Neither of them had ever rented. While it meant they were saving, it wasn’t helping them learn how to manage the costs of home ownership.

So they decided to test what it would be like to have their potential mortgage repayments coming out of their bank account.

Their try-before-you-buy exercise was a real eye-opener. They quickly realised their expected repayments weren’t going to gel with their plans to start a family and drop to a single income in the near future. “We [thought] we’re going to be eating vegemite and toast every night,” says 28-year-old Luke.

And just like that: they dropped their purchase price by $100,000.

It also highlighted areas they could cut back. They decided on a fixed-rate mortgage and set a goal of saving a buffer of about $2000-$2500 – or a month’s mortgage repayments. Even so, Luke, who now works as a mortgage broker, says the six months after buying their Brisbane home, were a little stressful.

“It probably took about six months until it became normal and you didn’t have to check the bank account every second day to make sure the cash was in there.”

Adjusting to the weighty costs of home ownership can make the first year of a mortgage challenging, particularly if rates rise shortly after you take the plunge. In June the Westpac Home Ownership Report revealed that 31 per cent of borrowers believe the first 12 months of their mortgage are the most challenging, with the perceived difficulty dropping off significantly after that.

The factors that made the first year tricky? Paying the deposit and stamp duty, said 36 per cent of respondents; understanding the best loan structure for their situation (32 per cent); and adjusting their lifestyle to accommodate repayments (25 per cent).

In March the Genworth Homebuyer Confidence Index showed 39 per cent of first home-buyers surveyed were expecting to have difficulty meeting their mortgage repayments in the next 12 months, up from 32 per cent in September 2013.

So what can you do to make the first year of a mortgage painless?

Start well

Do some solid prep-work. Jessica Darnbrough, head of corporate affairs, Mortgage Choice, has several suggestions: “Know your budget; know exactly what you can afford; know exactly what outgoing expenses you will have on top of the mortgage and then think about what’s the best way to structure the mortgage so you’re still in that home but not breaking the bank to do so.”

Acquaint yourself with all the home-buying costs: stamp duty, solicitor’s fees, moving costs and potentially, mortgage insurance.

“You need to think of it as a 10 per cent deposit plus costs,” says Darnbrough. “That might end up being 15 per cent or 17 per cent.”

Upfront decisions on the loan structure may include fixing all, or part, of the mortgage. With lenders competing aggressively, Darnbrough says: “We might not be at the bottom of the rate cycle but what buyers can be comfortable with is the knowledge that fixed rates are competitive.”

Peter Cerexhe, a former consultant lawyer specialising in property and author of Only 104 Weeks to Your Home Deposit (Allen & Unwin), has some post-purchase tips for weathering the transition to life’s biggest financial commitment.

Don’t be rattled

First, Cerexhe takes aim at the emotional turmoil of mortgage stress: “The first rule is don’t panic. You must remember that people have had faith in you already. They are lending you a large sum of money. They have looked at your capability to pay.”

Think survival tactics. Next, concentrate on getting through the first year and becoming comfortable with the rhythm of repayments.

“Your focus has to be on survival. Not being distracted by ideas of paying down the principal faster or restructuring things when you feel a little edgy.”

Spend consciously

If you feel backed into a financial corner, cutting expenses is one way to come out fighting. The Westpac survey showed men tend to cut back on alcohol while women target spending on grooming products, shoes and clothes. Cerexhe advocates putting unnecessary spending on hold for the first year: “You don’t need a new car that year or a box set of Game of Thrones DVDs.”

Use comparison websites to find competitive deals on utilities and insurances, says Darnbrough. Plus switching to a debit card will help you spend what you have.

Protect yourself

Protecting yourself will help ensure a happy-ever-after home ownership experience.

“I think we need to understand that the next direction for variable interest rates is probably up,” says Cerexhe, suggesting variable rate borrowers ask their lender to make sure they can handle a 2 per cent rise in rates.

A home loan with a redraw facility or a mortgage offset account is a way of building an accessible and tax-effective emergency buffer. And income protection insurance can ensure your home is safe if anything happens to your earnings.

But protecting yourself is more than having a financial safety net. Cerexhe encountered a couple who separated after only a few weeks of marriage. “They moved into a new home and the change was so sudden and so rapid in every part of their life that it tore their relationship apart,” he says. Ultimately it’s about ensuring your financial arrangements don’t jeopardise the important things in life. WHY STRESS?

  • One third of first-home buyers are using more than half their income to service their debts, compared with a quarter of home owners.
  • Underemployment was the main cause of first-home buyer mortgage stress (63 per cent), compared with 32 per cent for home owners.
  • Higher costs of living was more likely to lead to mortgage stress in home owners (49 per cent), than first-home buyers (25 per cent).
  • First-home buyers were twice as likely to consider refinancing to another lender in the next 12 months, (47 per cent), compared to 23 per cent of home owners.

Source: Genworth Homebuyer Confidence Index March 2014

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Posted by Christine Long – The Age Money on 9th October, 2014