Property Buying Guide
Brief guide to buying property
So you're thinking of buying property ... that's great news, but take care: your dream of owning your first home can quickly become a nightmare. Make sure to do your research and understand all the complexities involved in the process, beforehand.
- Choosing the right property
- Financial implications and securing the home loan that is best for you
- Legal considerations
- Further property resources
1. Choosing the right property
Buying a home is, more often than not, based on what we hear from our clients, terribly complicated and time-consuming. Planning is the key to having no regrets down the road.
What to do ... and not do when searching for a property:
- Know what you want and need - make a list of absolute requisites and "nice to have's". That way you won't be tricked into buying a property just because it looks nice although it doesn't have the amenities you actually need.
- Learn as much as possible about property buying and the market value of property in your preferred area; the internet, real estate publications and real estate agents are good sources of information.
- Visit the Real Estate for Sale section of realestate.com.au to get a feel for the price of properties similar to the one you are after.
- Use a property valuation tool, such as the one the Commonwealth Bank's website for an online Free Property Valuation.
- Be informed about the services offered by estate agents, solicitors, conveyancers, loan providers and mortgage brokers. Shop around as much as you can, and if you need qualified advice fill in our enquiry form and one of our mortgage specialists will get in touch with you in less that 48 hours.
- Refuse to be hurried into a decision ; you will be paying off your loan for decades to come ... you want to make sure you have chosen the right property.
If you take your time and do your homework, you will feel more confident that you have found the right property, at the price that you feel comfortable paying.
2. Financial Aspects
There are several aspects when it comes to sorting out your finances for buying your property:
- how much you can reasonably afford
- how much the banks will let you borrow
- understand the features of your loan (clicking on the links below will open a new page), this may allow you to pay off you loan sooner and save thousands on your interest. Use our extra payments calculators to find out how much you can save.
- Standard Variable Home Loan
- Basic Variable Home Loan
- Fixed Rate Home Loan
- Split Loan
- Introductory or Honeymoon Rate Home Loans
- All-In-One Home Loan
- Line of Credit/Equity Home Loans
- Low Doc Loan
- Bridging Home Loan
- Non-conforming Home Loan
- Professional Package Product
- No Deposit Home Loan
How much you can afford
You should carefully assess you financial situation and desired standard of living to calculate a loan amount you can comfortably afford. You should think about you current circumstances and financial commitments, but also about any changes that may occur in the future, such as starting a family, changes in your income or variation in interest rates.
Moreover, when determining how much you can afford to spend on a property, you should keep in mind not only the deposit, the loan amount (even if it is a 100% loan) or the interest, but also:
- legal fees
- loan establishment fees
- mortgage insurance
- stamp duty
- property inspection fees
When added to the required deposit, all these expenses can amount to a fairly sizeable sum, and most borrowers are shocked at the financial commitment required. On a mortgage loan of $300,000, expect to pay approximately $15,000 in fees. With mortgage insurance, this could rise to about $20,000.
For example:
Legal fees: If you employ a solicitor, conveyancer or estate agent for performing the legal transfer of ownership the fees are between $600 and $800 for an average priced home; alternatively, you can purchase a do-it-yourself kit.
Loan establishment fees: Lenders usually charge a one-off establishment fee on new home loans; the fees range between $600 and $1000.
Building Inspection: If you plan to get a building report, building inspections range from $250 to more than $2000, depending on the property size.
Stamp Duty: Stamp duty is charged in all states on the loan amount and the price of the property. Stamp duty may vary depending on the function, location and price of the property, but can add up to 5% to your overall expense. Please feel free to contact us to get an estimate on stamp duty for your property.
Insurance: If you are looking to borrow more than 80% of the value of the property, your lender will require you take out mortgage insurance. NB: this insurance covers the lender , not the buyer in case of payment default. You would do well to consider an income protection plan as well.
How much you can borrow
Eligibility requirements vary greatly between institutions, but lenders generally use two criteria to work out how much they will lend you:
- the borrower's income, existing debt (including credit card limits) and repayment capacity
- the loan to value ratio (LVR). This is the percentage of the purchase price that lenders will agree to lend.
The lender will then calculate a maximum loan amount. Again, the amounts various financial institutions will agree to lend you may vary greatly. Sometimes the amount may be much higher that you thought you could borrow.
Please consider carefully what you really need and can realistically afford. Don't allow anybody to persuade you to borrow more than you think you'll be able to comfortably pay off. Try not to spend more than one third of your gross income on mortgage repayments.
3. Legal considerations
During the buying and selling process you may come across several types of contracts such as loan agreements, authorities to sell, authority to act as mortgage broker on your behalf, contract notes and contracts of sale of real estate.
Take your time, READ EVERYTHING before you sign it, and make sure you fully understand its contents including all terms, conditions and fine print. Ask questions about anything unclear. If the explanation provided is still not enough, ask for professional legal advice. Also whenever possible, negotiate; many terms and conditions are negotiable between the parties.
4. Further property resources
- realestate.com.au - reputed property finder, with thousands of properties across Australia and oversees
- property valuation tool- on the Commonwealth Bank's website
We hope this information will help you on your journey; if you need more information on the types of home loan products and how they suit your individual home loan needs, our mortgage brokers can help.
Simply complete the brief Tridential online enquiry form and one of our mortgage brokers will be in contact with you to discuss your home loan options (our services are free of charge to you).
DISCLAIMER: Information on this Internet site should not be relied upon as a substitute for professional legal and financial advice or reference to the actual legislation. The financial information provided it is indicative only and should be qualified with the appropriate providers.
