Friday 02 Mar 2018
Property will likely be the largest investment you will ever make, so gather every piece of information you can, to be able to make informed decisions.
1. The deposit
Before you can start deciding on paint colours or buying that fabulous couch you saw in West Elm, be prepared to save up a deposit. This may mean eating less avocado on toast but the rewards will be infinite.
A deposit of 20% of the purchase price plus enough to cover costs is ideal. The bigger your deposit, the lower your loan to value ratio (LVR). This is the amount of the loan divided by the purchase price (or appraised value) of the property.
If your LVR is higher than 80%, you will usually need to pay lender's mortgage insurance, and the lender could charge you a higher interest rate.
2. The costs
You’re not just putting down money to buy the house or apartment, there are actually more expenses - sad face! Here are the other costs you will need to factor in:
- Stamp duty - this varies depending on your State or Territory
- Legal and conveyancing fees
- Moving costs like removalists and storage
3. First home owners grant
There is this magical perk that the Government introduced for first home buyers, called the First Home Owner Grant (FHOG) scheme which was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It’s a national scheme funded by the states and territories and administered under their own legislation. Under the scheme, a one-off grant is payable to first home owners that satisfy all the eligibility criteria. Are you eligable? Find out here
Working out what mortgage you can afford is about striking a balance between the lifestyle you want and the one you can comfortably afford.
Work out a budget that outlines all of your essential spending, then you will know how much you can reasonably pay back every fortnight/month.
Don’t forget that there are ongoing costs you'll have to manage on top of your repayments once you move into your new home like home and contents insurance, strata fees, water, electricity, gas and you might need to do some renovations before you move in.
Interest rates are at an all-time low sitting at 3 - 4%, so consider what financial position you would be in if they went up a couple of percentage points. At the very worst, imagine paying 18% interest on a 30-year fixed mortgage. It's almost unthinkable. But that was the reality for home buyers in October 1981!
5. Get advice
There is no greater advice than to get advice from experts. Talk to Nicole Cannon at Pink Finance, who will be able to help you work out your budget, choose mortgage lenders and oversee the entire process so you can go back to picking paint colours.
Check out Pink Finance’s range of calculators and FAQs
6. The auction
Your heart will probably skip a few beats but that’s completely normal; auctions can be terrifying! The more you know in advance, the better you will feel. The event will be loaded with emotion and expectation, so prepare yourself in advance by going through these questions:
Are your finances in order? Do you have mortgage pre-approval? Are you aware of stamp duty and other costs? Have you inspected the property more than once? Does the property need any work done and are you aware of those costs? Have you reviewed the contract? Have you reviewed a building and pest inspection? Do you feel 100% comfortable bidding on this property?
Most importantly, do you know your maximum budget? Don’t bid over what you can afford.
When bidding, be clear, confident and decisive. You may win or someone may outbid you - be prepared for both scenarios. If you have any questions, the real estate agents are there for you - they want a successful sale of the property and will be happy to answer your questions and support you through your auction experience.
See the rules for buying a property at auction by the NSW Government.
7. Preparing for settlement
The day you take ownership of your home is called ‘settlement’ and from the time between exchange of contracts and settlement – usually six weeks (though this may be negotiable), your solicitor or conveyancer will be busy organising the transfer of ownership of the property into your name.
Your mortgage broker will also be working behind the scenes, ensuring that your home loan will settle on the same day as your property purchase. This just means that the lender is able to pay the balance of the purchase price on the date specified by the vendor.
Here are some other things to consider as the process comes to a conclusion:
- Have funds available for stamp duty – this will be due at settlement
- Organise building insurance/ home and contents insurance
- Arrange the balance of the purchase price – that is finalise the finance and sign all mortgage documents
- Organise your utility providers (phone, internet, electricity and gas)
- Organise your movers and redirect your mail to your new address
- Advise your landlord of intention to vacate (if renting)
As a buyer, the period between exchange and settlement should be smooth sailing as your professional support team – your conveyancer/solicitor and your mortgage broker will do most of the work on your behalf.
When you get the keys to your new home, take a moment to let it all settle in - this is a major achievement! Pop the champagne and break out the plastic glasses - it’s time to celebrate!
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