Buying a home is the biggest investment most of us will make in a lifetime, it takes years to pay off and while we do that it’s our refuge and place of gathering and family.
For those already with property, it becomes a little easier to finance your next purchase, however, that doesn't make the art of finding the perfect property less daunting.
Now that we are getting on the other side of the Covid pandemic (at least for now) there is a slight easing of panic around property purchase but don’t let your guard down just yet, even in a cool market it's possible to fall into big traps with your property purchase, so do make sure you take your time, go carefully and research, research research.
As a conveyancer, I’ve seen just about everything cross my desk over the ten years plus of working around the legal aspects of property transactions in regional NSW. Here are some of the really big traps I see that I urge you to be particularly careful of so you can move into your new home with absolute confidence that you got the home you need, for the right price.
Online loan calculators are a good way to get started on your home investment plans. Just be careful though, they are only a rough guide and don’t take a lot of factors about your personal life into account. This is the quick version, a genuine loan offer takes hours of paperwork and will comb through months of your personal savings and sending records.
This is even more important as lending criteria gets tightened further to protect Australian’s from overspending and getting caught in the black. The onus is on the banks to provide a duty of care, however, getting a loan is still possible in most cases for working families, just be prepared to pull up every financial record you have to get the exact figure on what you can borrow.
When your home loan is pre-approved you can look for properties in your price range and create a budget for how much spending you can afford both on the home itself and all the moving parts that go with it.
It can be tempting to borrow every dollar you can from a lender and push your available amount to the max to secure a home, but in actual fact, the best way to go about it is to find out your loan limit and go under that.
When interest rates go up (and they will), if you have unexpected medical costs or if there are any impacts to your income, you have some breathing space to regroup and make a new financial plan.
Keep in mind too that buying a property costs money outside of the home itself. You still have to pay for the settlement transaction to go through, you might need to cover land tax as well as moving costs, insurance and a host of other extras to make your home comfortable and safe.
If you hire your conveyancer after you’ve signed the sale contract it’s too late to make any changes. You've locked yourself into the purchase as-is without any room for negotiation or fixes, even on big problems the contract might contain.
When you hire your conveyancer before you sign the paperwork they can make sure the sale contract is what it’s supposed to be and no legal goblins are hiding behind the curtains.
This doesn’t have to be about the buyer hiding anything either, in some cases council restrictions can prevent you from going ahead with future building or renovation plans or there are errors with the title going back to previous owners no one's picked up before. Getting all these out in the open before you buy lets you make a solid decision on how you want to proceed and opens negotiations for the property transaction to flow more smoothly.
Well before you get started, get your conveyancer on board, discuss your plans with them and what you need from your home. That way when they go over the contracts (before your purchase) they can make sure you are buying something that will work.
Once the contract is signed your conveyancer will go on to handle the rest of the settlement phase for you, advising on any taxes and fees, ensuring the valuation is accurate, and working with the seller's representative to ensure settlement of the property goes through on time.
I’m not saying buying a home isn’t emotional, it absolutely is, but even when those emotions get big, you have to keep a clear head. Buying high on emotion (doesn’t matter if that is fear or elation) means you will overlook important aspects and rush to buy rather than taking the necessary time.
The fear of missing out is causing a real panic about buying quickly. I see clients who rush to get over the line on a home that they have barely seen, let alone researched, because there is a fear someone else will take it if they stop to consider their purchasing decisions. And actually, that’s not really inaccurate. Houses are getting sold in record times at the moment but rather than rushing and grabbing the first thing available, it’s best to hold off, keep saving and keep waiting for the right purchase, there will be new homes on the market all the time.
Of course, there is a greater fear that waiting will mean prices climb even higher, putting you in an even worse position financially, but the truth is, most people are willing to overpay on property prices, which is a dangerous game to be playing. If you can afford it, that’s okay but be careful not to rush in so hard that you overtax yourself and struggle with repayments.
If you do overpay on what the property value is worth there is every reason to believe you can still make that back, however it might take more time than you expect for prices to come back. There is no crystal ball for these things, but don’t bank on being able to sell your home for a profit in five years time, look to keep your property for at least ten years or longer if possible, to see a good return.
The way to know what your potential new home is worth is through research. Lots of it. You need to put in the time to know the neighbourhood, the surroundings and what living there is like.
The value of a property goes up when there are amenities close by including public transport, schools and places of work. Also, look to see the neighbourhood crime rate to know if the area is safe.
Even a thorough look over the property while you attend open inspections won’t give you access to information on every part of the property. You’ll need to hire a professional to look into the roof, under the house and inside the switchboard to know about real issues the property may have. Their careful analysis includes how much you can expect repairs to the cost and any recommendations they have for improving the home once you buy it.
It may not change your decision to buy the home, but what it does is give you absolute transparency on what you are buying and what the long-term costs are going to be so you can factor them into your budget and take them into account for the overall value of the home in years to come.
Some repairs are expensive so it’s worth spending the money to know in advance, especially if you can’t afford them. It also opens negotiations for the vendor to make repairs before settlement or to bring the cost down. Be sure to get your conveyancer involved in this process so the negotiations are reflected in the sale contract.
Worried about missing out on your dream home because you waited for a report? you can actually make a legal note on your formal offer that allows you to pull out of the purchase if faults are found during the inspection. Talk to us about how to get this done correctly so you can put your offer in for the purchase and still get your building report completed.
Even though it might be tempting to put all your savings into the downpayment of your first home, you need to be careful with what goes onto your credit card right up until your loan is fully approved.
The lender’s decision on your loan is based on your credit score and debt-to-income ratio. They keep track of your spending right up until the closing day, and it makes sense if you think about it; How will you pay off your mortgage if you have commitments to pay huge amounts of your credit card because you went furniture shopping?
I get it, of course, you want new furniture to suit your amazing new home and really settle in. That’s okay but just hold off on big purchases on your card until after settlement and your sale purchasing expenses are completed, and even then, keep some money aside for a rainy day and then expect some bad weather.
Taking your time and doing everything carefully will help you make a home purchase you treasure for years to come. If you need help there are professionals who can assist you at every step to give you absolute clarity and confidence in your decision.
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You've saved up what you think will be enough to secure a loan to purchase your first home, you're on the right track. The next step is to talk to a lender who can inform you of the costs and give you a better indication of what your buying figures are.
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