Buying Your First Home?

What's the first hurdle when buying your first home?

For most, it’s working out how big a deposit you’ll need and then saving that home deposit.

• Work out what you can afford to borrow and still live comfortably.
• Get advice from a financial planner, friend or family member who has bought property before.
• Arm yourself with as much advice as possible.
• Don’t over commit when buying your first home. Most people will qualify for loans far above what they can afford to pay back. Don’t fall into this trap. You’ll need adequate reserves to cover more than just mortgage repayments.
• Start looking around once you have around 5% of the purchase price and keep saving.

What are the things I need to know when buying a first home?

You need to know:

• How much you can afford to borrow.
• How large a home deposit you will need.
• Arm yourself with as much advice as possible.
• What the other costs are that you will incur.
• How to make an offer.

How much money can I borrow to buy a house?

• A bank or mortgage broker can help you establish a realistic figure
• If you have less than 20% of the purchase price, you may need to pay Mortgage Insurance. This allows you to borrow a larger percentage of the purchase price but slows the rate at which you pay off your loan.
• Mortgage Insurance can be included either in your upfront costs or in your loan repayments so that it’s spread out over the term of the loan.
• Once you have decided that you are comfortable with the amount your Lender has approved for you, it’s wise to get your lender’s ‘pre-approval’ or a ‘Deposit Bond’. Then you can bid confidently at an auction, or make an offer on a ‘private’ sale, knowing your lender won’t say no.

What is Stamp Duty? How much will I need to pay?

• Stamp Duty is a tax levied by states on various types of transactions such as transfers and agreements for the sale of real estate.
• The amount of stamp duty you pay is based on the price of the property you buy. The amount varies from state to state.

Visit the revenue office website of your state for further information:

• Victoria
• NSW
• ACT
• Tasmania
• South Australia
• Western Australia
• Queensland
• Northern Territory

When should I involve a solicitor or conveyancer in the purchase of my home?

Before a contract is signed is the best time to get legal advice from a qualified lawyer, solicitor or conveyancer. Opportunities to end the contract can be severely limited if legal advice is sought after the contract has been signed.

Can I negotiate the settlement period or deposit?

Yes, both can be negotiated with the seller prior to signing the contract.

What is convayancing and how does it relate to the buying process?

Conveyancing is the protocol by which legal title (or ownership) of a property is transferred from one party to another.

This is usually done one of three ways:

• A solicitor
• A conveyancer
• By the purchaser, using a do-it-yourself (DIY) conveyancing kit

How does the settlement process work?

It usually takes four to eight weeks from the exchange of contracts for settlement to be completed. The terms of the contract will make the exact date clear.

Until settlement, the property remains in the possession of the vendor, however, risk passes to the purchaser so it is recommended that the property be immediately insured with a building insurance policy.

1. Your solicitor / conveyancer will prepare all the documentation that will be required to complete the purchase on the day of settlement.
2. Your solicitor / conveyancer will contact the vendor’s legal representative to arrange the date, place and time of settlement.
3. Your solicitor / conveyancer will advise you prior to settlement, of the exact date, time of settlement and the amount of funds that you are required to provide prior to settlement (if applicable).
4. After settlement, the vendor’s solicitor will contact the real estate agent that sold you the property and instruct them to release the keys to the property to you.
5. Your solicitor will contact you to confirm settlement has taken place. They will also send you a Statement of Adjustment to show you how the funds have been disbursed to all parties involved.

Should I get a building and pest inspection?

Building and pest inspections are a vital part of the due diligence process when buying a house. When buying an apartment, a strata inspection report may be more appropriate, depending on the size and construction of the block. Remember though that almost all inspection reports reveal some form of problem, particularly with older properties.

A building and pest report will provide crucial guidance as to the condition of the property you are considering and can be useful in price negotiations, if significant problems are present. Here are some tips on understanding and responding appropriately when you receive your report:

• Don’t be shocked if your report is in the order of 30 or more pages. That’s normal.
• The presence of ‘past termite activity’ should not be viewed as a deal breaker. What is important is the extent of the damage and whether there is evidence that corrective action has been taken. Naturally, if current termite activity is present, this is potentially serious and needs to be fully assessed and dealt with.
• It is the building inspector’s job to point everything out that he/she sees to ‘cover’ themselves. It’s important you calmly read through the information and understand what it means.
• If you have a question, phone the inspector. They will often be happy to discuss their findings and explain their relevance.
• If major faults have been found, discuss these with your real estate agent. It may be possible to negotiate a suitable adjustment to the agreed property purchase price.
• Be realistic. A small range of typical faults may not be fair grounds to renegotiate price.

How do I work out market value so I don't overpay when buying real estate?

"Market value" is whatever a willing buyer will pay for a property when it sells.

While this advice doesn’t help new buyers, or even experienced buyers, there are ways to work out what you should pay for a property. Here are our tips:

• Use technology. Many real estate websites provide suburb median prices and recent sales details. Remember that a median price is only indicative of the middle price in a suburb; it may not reflect the value of the property you are considering.
• Ask real estate agents.
• When buying an investment property, rental returns are the key factor in determining value. 5 per cent gross rental return is considered the ‘rule of thumb’ which essentially converts to $1 in weekly rent for every $1,000 spent buying a property.