Do’s And Don’t’s Of Buying A Property

So, you are now ready to buy a property.

What should you do.

The first and crucial aspect of buying a property, whether it is your first home or an investment property is to ensure your finance is in place. You should look at your budget to ensure that you can make adequate repayments (taking into account fluctuations in interest rates).   There are various aspects to “having finance in place” and where to go such as:

  1. Direct to your bank;
  2. A Broker;
  3. A Private Lender;
  4. Family loan;
  5. Guarantee;
  6. You can also contact the Credit sand Debt Hotline on 1800 808 488.

finance broker is an agent between you and your lender and looks for the “best deal” for you with a bank.  There may be a commission payable by the bank to the broker for them putting you forward as a suitable borrower.   You should ensure the broker is registered with the Australian Securities Investment Commission or MFAA.  However, just because a broker is registered, does not mean they are reputable and above board.

Note:  each application you make, may attract an application fee.  Your loan application may only be valid for a certain period of time and you will have to re apply for finance if you are outside of this time frame.

The National Consumer Credit Protection Act 2009 affords borrowers protection and requires home loan providers to give you information to assist you on whether you can afford to borrow.  The Act applies to mortgages, housing loans, credit cards, overdrafts, short term credit and hire of goods.

Going direct to a bank – if you already hold a mortgage with your bank, it may be easier for you to approach the bank for advice.

Private Lender – As this states, a private lender may assist you if you have not been able to secure your required funds from a bank. The interest rate is usually higher and the loan may be for a shorter term that a standard bank 30 year loan.

Family Loan – You will need the family member to provide a confirmatory letter to your bank saying they are gifting you the sum of $X, or this may be by way of an unregistered second mortgage.

Guarantee – The bank, lender may require a guarantee to be given by a family member if your credit history is a little dubious or you are borrowing a high percentage from the bank and the bank is concerned about repayments.

We at Taylor and Scott can recommend brokers as we have a true and tried solid and trustworthy list of brokers who we liaise with.  We want the best for you.

Once you have provided the lender with all the relevant papers (tax returns, pay slips, bank statements, credit history) and you have obtained pre approval, you are now ready to look for a property.  If you are borrowing over 85% from the lender, you may have to pay Mortgage Insurance which can add $6,000.00 plus to your loan (in addition to stamp duty, legal costs, moving costs, renovations etc).

You should look in an area which you can afford.  Have you investigated the paper, real estate agent’s, internet, have you attended auctions, spoken to friends.  What is your future planning both in your private life and working life?  Some real estate agents can put you on their books for when a property formally becomes available.   Under the Property Stock & Agents Act, an agent cannot market a property without a full Contract for Sale of Land.

How are you buying the property – at auction or by private sale.   The Taylor and Scott website has an article on buying at auction, or privately and feel free to have a look at this.   Have you done your homework?   Remember at auction, bid for the property, not against another bidder.  Are you buying off the plan or an existing property, or Strata Unit?

Do you have the deposit saved up? Do you have more than the 10% required?

Are you paying too much for the property.  What is the demand in the area.  Can you afford renovating the property.   Do you need to sell your property before you buy. Do you need bridging finance?   These are all matters that you will need to consider.  Draw up a checklist of pro’s and cons’ for yourself and ask yourself these questions.

  1. You have finance in order
  2. You have found a property you like
  3. Is the property suitable for the use you want?  Entertaining, part home part business occupation, does it comprise a shop with a residence above?
  4. Have you taken into account extrinsic fees in addition to your purchase price such as stamp duty, legal fees, registration fees, loan application fees and lenders fees?
  5. Is there any proposed development in the area;
  6. What is the infrastructure;
  7. Are there restrictions on the use of the property?  (your solicitor will be able to advise you in this regard).

You now need to get the contract over to Taylor and Scott to have the contract reviewed.  This is important as there may be some special conditions in the contract that is detrimental to you such as a request by the Vendor to release your deposit to it.  This may be to pay their stamp duty, or as a deposit on their purchase property. But what if the vendor is in financial strife and we don’t know this?   There are risks involved in releasing the deposit, but there are also other matters that we at Taylor and Scott can discuss with you before you commit yourself.  Once you commit yourself and contracts are exchanged, you are locked into the contract, whether this be under a cooling off or not.

Your lender will in most cases provide you with pre approval so that you can look for a property in your price range. However, you will need to obtain written loan approval from the lender.   The lender will not undertake a valuation in most cases until you have exchanged contracts.  This is when you will need to exchange with a cooling off period.

At Taylor And Scott ‘We Care For You’