- Are you ready?
- Pre approval
- Location & Type
- Common terms
- Bad Credit
- Deposit Bond
The saying goes, “look before you leap”, and it couldn’t be more true than when considering purchasing a property. Before you leap into finding your dream home, take a breath and ask yourself the big question – “am I ready?”. If you’re still experiencing itchy feet and wanderlust then possibly you’re not quite ready for the commitment at this time in your life.
But if you think you’re all in, assess whether you have job security needed to make it work. High job security (12 months plus) will give lenders more confidence in you and will give you a better chance of getting your foot in the door.
If you have already have children then the urge to own your own home will probably be high. Unfortunately, the banks are fully aware of the costs involved in raising children, and for each dependent you have the amount you can borrow tends to decline substantially
Evaluate your circumstances….You’re probably wondering how much you can borrow. Good question! The answer is determined by a multitude of factors. A mortgage is a massive financial responsibility and to get a good idea of where you stand it’s best to have an honest conversation with yourself to figure out what you can afford. Knowing this will help when you start searching for a property.
If you are unsure of your credit history you can apply for a free copy of your credit file
Mortgages & Rates …..Bonus points if you have your deposit ready, but you still need to shop around to find the right financing for you. Be careful to make sure you understand all the terms of the agreement. Find out about the:
• Interest rate
• Term of the loan (usually 25-30 years)
• Whether you can redraw funds
• Can you make additional repayments and are there conditions attached?
• How often is the interest calculated?
If you don’t have a deposit saved, full finance of the purchase price may be an option by using your renting history as proof of savings or by having a parent go guarantor, but without equity there are more risks associated and you will be required to have full insurance.
There are two options with interest rates – fixed and variable. Your financial advisor can help your decide which will suit you best, there are benefits to both. A fixed rate mortgage would be suited to someone budget-minded. A variable home loan has a bit more risk, but gains are made when interest rates fall helping you to possibly pay off your loan quicker. Some loans can be split between fixed & variable.
There are many types of loans available to help with many types of scenarios. The learn about some alternative or low doc loans refer to Alternative & Low Doc loans
The costs of buying a home …It pays to seek advice from us to truly get the scope of the full costs associated with buying a home. Here is a list of costs you will likely incur:
• Deposit. You may need to come up with a 5-10% deposit to secure a home loan. To avoid paying Lender’s Mortgage Insurance (LMI), approximately 20% is required. Low deposit home loans do exist, but your mortgage insurance will be much higher and there can be a few more hoops to jump through.
• Stamp duty. The amount of stamp duty tax you pay depends on the state you live in and is applied on the purchase value of a property. You can use a Stamp Duty calculator for a specific quote.
• Legal and conveyancing fees. Depending on the amount of legal work required for conveyancing and other legal checks, you should put aside $800-$1500.
• Finance and insurance costs. If you’re borrowing more than 80% of the purchase price, than you will have to pay LMI to protect the lender if you fail to make your repayments. There can also be fees for valuations, applications and settlements. A mortgage application can cost $0-$600 depending on the lender, and a valuation could set you back about $300-$500 if the bank doesn’t waive the fee.
• Building and pest inspections. Make sure you have a solid home or investment property by ensuring you complete a building and pest inspection. This should not be overlooked as it could cost you far more in the long run going without. Inspections average $500-$700 for peace of mind that the property is structurally sound and pest free.
Other costs to consider are ongoing mortgage repayments, utilities, moving costs, council rates and strata fees, home and contents insurance and mortgage protection insurance.
Otherwise known as conditional approval or approval in principle, securing pre-approval before even searching for your home is ideal so you can know your price range. By providing your bank or lender with your financial details – such as your credit report, savings, income and investments – they will be able to review the information and grant you with pre-approval to borrow up to a certain amount. Now you’re ready to go shopping!
When riding the emotional rollercoaster of buying a home, it’s important to have a clear sense of what you are looking for. The list of priorities will vary for investors, singles and those looking to purchase a family home. Consider making a checklist of all your non-negotiable, “must have” requirements. Here is a list for wannabe homeowners to work from:
• Location – close to work, schools, family and friends
• Access to public transport, services and shops
• Is there established infrastructure or plans to develop the area?
• Suburb character – is there a good vibe and friendly community?
To find out where you can afford to buy, you can research property prices, and there is plenty of existing property market data to help you quickly find the median price of an area you are interested in.
Figuring out what type of property is right for you:
• House, unit, studio, townhouse, acreage?
• Do you have a style preference? Victorian, Art Deco, modern or a renovator’s dream?
• The practicalities – how many bedrooms, bathrooms and parking spots?
When buying an investment property there are going to be a few different factors to consider than when buying a home. Establish whether you are going to fix it up and flip it or if you want to hold onto the property and rent it out.
A different set of criteria for choosing the type of property to invest in is necessary. For strong capital growth you need to find a property that will increase in value. This can take a while, but look for:
• Areas with high rental yields compared to the property price
• Research recent sale prices for an idea of prices
• Is there a strong rental demand? Look for tight vacancy
• Are there upcoming developments or zoning changes? What impact will they have?
• Is there proximity to schools, shops, hospitals, public transport?
• What will the maintenance costs be like?
• How many bedrooms, bathrooms and parking spots?
Property Inspection…As soon as you enter the home you are considering buying, you will get an immediate emotional response – negative or positive. While it’s easy to walk away when you get a negative vibe off a property, it’s much harder to do when the feeling is positive. A positive emotional response is very guiding, but don’t get too invested before making important structural checks, investigating the utilities and sussing out the new neighbourhood!
Things to watch for:
• Mould! Check for damp or mould spots on the ceilings, walls and skirting. Pay careful attention to areas with fresh paint touch ups.
• Sagging ceilings or buckling walls.
• Do the doors and windows fit right and open and close smoothly?
• Test the taps for flow and even temperatures, and flush the toilets.
• Check under carpets to see the condition of the floors.
• Take a look under all sinks to ensure plumbing looks good.
• Check the hot water system.
• Lights and fuse box.
• Roof, guttering and drains.
• Exterior walls – check for cracks.
• Inspect the neighbourhood and get a feel for whether it suits your lifestyle and requirements.
If you are sure you want to go ahead with purchasing the property, get a qualified building inspector to make an assessment. They will look for structural defects, pest infestations, faulty wiring, plumbing and drain issues, asbestos, lead paint, and more
Preparing for purchase… A licensed conveyancer manages the exchange of contracts and other legal searches. Once you have found the property you want to purchase, you may wish to get a property valuation to help you figure out the right price to offer. We can help you with previous sales history and examination of the Contract of Sale and accompanying notes which is often where issues may be identified which could incur later expenses.
Finally, you are ready to make an offer! Don’t low-ball here less than 10% of the asking price, otherwise you may miss out when higher offers stream in. When you’ve decided on a figure, reach out to the agent and let them know how much you’re willing to pay and your deposit amount. We will help you apply for a deposit bond if required (if your actual deposit money held is less than the minimum required by the vendor).
Next, simply exchange contracts and pay the deposit. Both you and the seller are not legally bound to the sale until the contract of sale has been signed and swapped. Included in the contract of sale is the:
• Names of parties
• Property address
• Purchase price
• Terms and conditions
• Special inclusions in the sale
• Date of settlement
If you’ve bought through private treaty you will have a cooling off period. This is not available when sale is made by auction. During this period you can cancel the sale if you change your mind, but you may be required to pay a penalty. The cooling off period varies by state.
In the time between exchange and settlement – you should be busy arranging the balance of the selling price by finalising the finance and signing the mortgage. You will also want to insure your property, and you will be required to take out building insurance.
Once the balance of the purchase price and Stamp Duty is paid, the settlement of the property has been made and you will receive your keys and title deeds. Essentially, the lender will transfer your money to the seller and the property is ready for you to occupy!
First Home Owners Grant … Are you eligible for the first home buyers grant or reduction in Stamp Duty? If you and your partner haven’t ever bought a property before, there’s a good chance you are eligible to receive the First Home Owner Grant (FHOG). FHOG is a national scheme, but each state funds its own and the amount varies state-to-state.
The government will determine whether you can receive the grant based on whether you have purchased a home or investment property previously, or whether your spouse or partner has too. It’s not necessary to apply in advance, but you need to submit your application within 12 months of purchasing your new home.
Moving into your new home … You are almost ready to move into your home! Now you will need to sort out utility accounts, pack your belongings, and employ the help of a removalist and possibly a cleaner! Don’t forget to transfer the address on all your accounts and organise for mail redirection
Acceptance: An acceptance of an offer according to its terms which usually leads to a binding agreement or contract.
Agent: A person given permission to act on behalf of a client in the sale, purchase, letting or management of real estate. Agents must be licensed from the relevant state agency.
Allotment: An area of land that is subdivided into smaller pieces. These smaller allocations of land are known as allotments.
Amenity: Is a feature of a neighbourhood. For example, a public swimming, school or park can be considered as amenities.
Apartment: A self-contained residential unit that is usually part of a shared building or complex.
Appreciation: The increase in the value of real estate caused by external economic factors and market forces.
Architrave: A moulding surrounding a door or window opening.
Auction: A public sale in which property is offered for sale through a competitive bidding process.
Beam: A horizontal, load-bearing piece of timber or metal that has structural properties.
Bearer: A sub-floor timber or steel beam that supports floor joists.
Body Corporate: A body of owners in a block of units. The council of the body corporate – elected by property owners in the block – meets at regular intervals to discuss various matters of administration, including repairs, maintenance and security.
Boundary: A line separating adjoining properties.
Breach of contract: Breaking the conditions of a contract.
Brick Veneer Construction: A system in which a timber frame is tied to a single brick external wall.
Bridging Finance: Finance that is obtained for a short period of time as a “bridge” to long-term finance. This funding may be required if a home purchase completes before the owner’s sale.
Building Regulations: Rules which are designed to maintain public safety, health and minimum acceptable standards of construction.
Caveat: Warns a person buying real estate that a third party has some right or interest in the property.
Caveat Emptor: This principle of law requires that the buyer is satisfied with the property they wish to buy before completing the transaction. The buyer purchases the property on an “as is” basis.
Certificate of Title: A document that confirms the ownership of land. It shows who owns it and whether there are any outstanding mortgages or loans against it.
Chattels: Property other than real estate that is included in a sale, including items of furniture.
Clear Title: A title that isn’t encumbered with outstanding mortgages or loans.
Cluster Housing: Detached group of houses that have a common open space.
Commission: A fee or payment made to a real estate agent on completion of the sale of a property.
Common Area: A shared area that is available for use by more than one person, which might include the stairwell of an apartment block.
Common Law Title: Sometimes referred to as “old system title”, a common law title consists of a series of title documents referred to as “a chain of title”.
Compulsory Acquisition (resumption): The power of central or state governments to purchase property from without the owner agreeing to sell. A compulsory acquisition order could be used for the building of new transport links.
Contract of Sale: A document that lists the terms and conditions of a property sale between the vendor and the purchaser.
Conveyance: The legal process of transferring the ownership of property from the seller?s name to the purchaser?s.
Covenant: A requirement noted on the title of a property that forces the property’s owner to adhere to named terms, conditions and restrictions regarding the property.
Cover Note: A document issued by an insurance company to temporarily prove that a property has current insurance.
Deed: A legal document that is a record of an agreement, obligation or conveyance of property.
Deposit: The sum of money normally paid by the buyer at the time of exchanging contracts. It is typically between 5 and 10 percent of the final purchase price.
Dual Occupancy: An area of land or an existing dwelling that is zoned in such a way that allows the owner to construct a building that has two separate living arrangements.
Duplex: A residential property with 2 apartments ? both of which have separate entrances.
Fittings: Goods or articles that can be removed from a property without causing damage or an obvious reduction in its value. Some examples:
• Paintings or mirrors that are not bolted but hung or screwed to a wall.
• Curtains and curtain rails
• Free-standing ovens, refrigerators and washing machines
• Beds/sofas and other free standing items of furniture
• Television aerials and satellite dishes
Fixtures: Items such as baths, toilets and walk-in wardrobes that form part of the property and cannot be removed without causing damage. Some examples:
• Light fitments
• Central-heating boilers and radiators
• Built in wardrobes/cupboards (e.g. if they use a wall to form one of their sides and would thus be incomplete if they were removed)
• Bathroom suites (sinks/baths/toilets)
• Kitchen units
• Wall paintings
Free Standing: A property that stands independently of others.
Gazumping: The withdrawal from a verbally agreed sale by the vendor in favour of a quicker or more profitable sale. This practice is perfectly legal before contracts are exchanged and real estate agents usually act in the vendor?s best interest and take the higher offer. Any deposits are refundable but no compensation is owed. (http://www.fairtrading.nsw.gov.au/ftw/Tenants_and_home_owners/Buying_property/Making_an_offer/Gazumping.page)
Home Unit: A residential property grouped with others, having shared common areas and owned under a group title system. An apartment within a block of apartments may be referred to as a home unit.
Interest only loans: The principal amount borrowed is not repaid until the end of the loan. Only interest is payable in the interim, but the owner will be expected to save through endowment or other property savings schemes.
Inventory: A list of items included with a property, including furniture and furnishings.
Investment: The purchase of an asset (like real estate) in order to produce capital gain.
Joint Tenants: Joint tenancy is the holding of property in equal shares by two or more persons.
Land Tax: A State government tax payable by owners of property based on the unimproved capital value of the property.
Listing Agreement: A contract between a property owner and a real estate agent that sets out the terms, conditions and commission associated with the sale of a specific property.
Mortgage: A legal document that gives a lender an interest over a property to secure the repayment of a loan.
Mortgagee: An entity that lends money on the security of a mortgage.
Mortgagor: An entity that borrows money offering the security of a mortgage.
Option to buy: A legal document giving a person a right to buy according to an option price and predetermined terms and conditions.
Principal and interest loan: A loan whereby the lender repays a combination of interest and the principal borrowed throughout the term of the loan.
Private Treaty Sale: Sale of property through a real estate agent on the open market.
Progress Payments: Funds paid by a loan provider in instalments to a builder – as the building work meets predetermined targets.
Property Management: The management of a property on behalf of the owner.
Rates: The amount charged by the local council or water authority to provide services to a property.
Real Property: Land with or without improvements on it.
Reserve Price: This is the minimum price a seller has specified that they will accept to sell their property at auction.
Search: The process of investigating title to land in order to ascertain if the vendor has the right to transfer ownership.
Semi-detached: Two houses joined together by a common wall.
Settlement: When the sale of a property is legally finalised.
Stamp Duty: A government tax administered by individual states. It is calculated according to the sale value on the contract of sale. For mortgages, however, it is calculated on the amount to be advanced.
Strata Title: A system of title that allows the owner of an apartment to have separate title for that specific unit of the building.
Survey: Shows the dimensions and boundaries of land and the exact location of buildings.
Tenancy: The right to occupy land or buildings as provided by the terms of a lease or other agreement.
Tenants in Common: The holding of property by two or more owners.
Terrace: One of a row of houses joined together with common walls.
Torrens Title: The name of the government system of recording ownership of land.
Town House: Two-storey attached dwellings usually registered under a strata title.
Transfer: A document registered at the Land Title Office recording the change of ownership to a property.
Unencumbered: Usually describes a property free of secured loans and mortgages.
Valuation: A written opinion of a property value ? usually by a qualified valuer.
Vendor: A legal property owner who offers the property for sale.
Villa: Single-storey dwelling usually registered under strata or community title.
Zoning: Description of the allowable uses of land, as set out by local councils or planning authorities.
Many of our lending panel will lend to people with a poor credit ratung. We can assist will many secarios. For some examples refer to Alternative & Low Doc loans
How can I pay 10% deposit when I am borrowing 95%-98% and I don’t have the money? Don’t worry – we can help you purchase a deposit bond which basically is a guarantee that the balance of the deposit will be paid at the settlement of the loan.