Buyer beware !

Changes in the finance sector are reflected in a hundred percent jump in mortgage foreclosures compared with last year. Decades ago the majority of home purchases were financed by the banks, credit unions or building societies.
Rigorous conditions applied. Applicants were required to have at least a twenty percent deposit, provide pay slips or other evidence to establish the ability to service the loan - and the maximum term was twenty five years.
Coupled with the dramatic increase in home prices in recent times has been the emergence of what are termed " non-conforming lenders ". These institutions tend to serve those rejected by the traditional lenders and in most cases offer loans for one hundred percent of the house price. In such cases the applicant has no deposit and because of the increased risk to the lender - probably pays a higher rate of interest than loans offered by the banks.
Non-Conforming lenders are a risk operation for those seeking higher interest rates for deposited money. Because they lend to the low end of the market they are the quickest to foreclose when a loan goes into default - reaching a deficit gap of thirty days on payments due.
Unfortunately many people are desperate to get on the home ownership ladder and for some the only way to do this is to take a one hundred percent loan - and hope for the best! They tend to forget that there are more issues than just the purchase price - and these costs include solicitor's fees, stamp duty, conveyancing of the title - and of course council rates.
People on this perilous point of balance only need illness, a job loss or an unexpected expense - such as a major car repair - to tip them into disaster. There is every chance that at next week's meeting the Reserve Bank of Australia may increase interest rates to tamp down inflation - and that foreclosure rate will jump even higher.
Owing one's own home has long been an Australian dream - and we have one of the highest rates of home ownership in the world - but both the financial and emotional loss of a foreclosure can be devastating. Prospective buyers are urged to beware the advertisements offering easy money and do their homework before signing on the dotted line !