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Steps to buying a house in Australia
| Posted on June 17, 2018 at 7:53 PM |
1. Are you ready? 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 (in some cases by
up to $50,000 per child). 2. Evaluate your finances and budget You’re probably wondering how much you can borrow
from the bank. 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 your
accountant to figure out what you can afford. Knowing this will help when you
start searching for a property. Apply for a copy of your credit file and make sure
you clear away debts. If you have bad credit, it might not be the best time for
you to purchase a home or investment property. If you have multiple credit
cards and loans to pay off, minimise these as much as possible. Reducing your
limit on your cards will help you secure a larger finance amount. If you’re
struggling to meet credit payments, reach out to your provider to help you
renegotiate the terms of your payment schedule. 3. The cost of buying a house It pays to seek advice from a financial advisor,
accountant or lender to truly get the scope of the full costs associated with
buying a home. Here is a list of costs you will likely incur:
Other costs to consider are ongoing mortgage
repayments, utilities, moving costs, council rates and strata fees, home and
contents insurance and mortgage protection insurance. Not to mention repairs
and maintenance to your home. It’s wise to have $5,000-$10,000 in a savings
account for emergency repairs. Extra costs when buying an investment property It’s essential that you cover maintenance,
insurance, property management, council and water rates, land tax and body
corporate fees (if applicable) on top of your interest payments, if you are
borrowing. Lenders are tighter than they used to be and they expect a full 20%
deposit. 4. Investigating mortgages and interest 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:
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. 5. Getting home loan pre-approval 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! 6. Choosing the suburb and type of property 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:
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:
Buying an investment property 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:
7. Do I need a real estate agent or buyer’s agent? Reach out to local real estate agents for
information about what’s for sale, tips for buying a house in the area, what
the area is like and how the property market is performing, along with any
other general queries. Appointing a buyer’s agent is handy if you are looking
to buy at auction, but they can also work to find suitable properties for you,
negotiate with the seller, and complete background checks on the property -
eliminating some of the stress in a stressful time! 8. Property inspections 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 neighborhood! Things to watch for:
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. 9. Preparing for Purchase A licensed conveyancer can request inspections for
you while also managing the exchange of contracts and other legal searches.
Once you have found the property you want to purchase, get a property valuation
to help you figure out the right price to offer. 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. 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:
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 -
generally six weeks - 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! 10. 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. |
Categories: Buying a property
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1282 Comments
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