Being a first-time home buyer is exciting! But I know it can also feel overwhelming. Itâ€™s one of the biggest purchases we may do in our life. Making sure you have the money to buy can certainly reduce your stress.
Factor in additional costs
I often come across people who donâ€™t know what to prepare for, and are potentially short when it comes to money to buy property. They make an offer on a house and it stretches them to the mortgage of their borrowing limit. They havenâ€™t factored in adjustments at settlements, stamp duty costs, transfer fees and conveyancing fees.
When you are looking to buy property and you are thinking about your budget, youâ€™ve got to factor in the stamp duty costs. You can go to the state revenue office website and use the calculator there to work out what the stamp duty costs would be, depending on what you are offering. Also factor in bank fees when you are going for a mortgage. Bank fees can range from AUD 1,000 to AUD 2,000. Conveyancing costs are usually about AUD 1,500. Transfer costs are another couple of hundred dollars on top of that, as well as the lodgement with Land Victoria. So, please donâ€™t be short. If you are short on what you are borrowing, make sure that you got some savings that you can access at the settlement.
The standard contract term is you should pay 10% deposit. That means, you actually have to pay the deposit in cash â€“ you need that money to buy upfront. You can negotiate the deposit amount potentially down to 5% or even lower but understand that if the contract says you have to pay 5% or 10%, that cash amount needs to be paid when you sign the contract. Youâ€™ll need to have the savings to cover any deposit that you got to pay. On some occassions, you can either use a bank guarantee or a deposit bond to cover your deposit. So that is allowed in the contract, for example, if your deposit has to be AUD 20,000 and you donâ€™t have that cash, you can go to a bank and buy whatâ€™s called a deposit bond which is like an insurance policy that the bank puts up and then if the contract fails, for whatever reason, the bank pays that AUD 20,000.
Where to get financed
You donâ€™t have to go to the four major banks. You have to go to the bank that has your main deposit accounts. If they have your main deposit accounts, it is easier for them to see the proof of your income. If you go to a broker and the broker has access to far more banks, he or she can find you the best deal. Just be aware that you actually have to provide more information to get your application over the line.
Communicate to whoever is doing the conveyancing. If it will be us, we need to know who you are applying for with your finance. We need to have the contact details for your broker or the person you are dealing with at the bank. Weâ€™re going to be following them up â€“ to see where that application is up to and if it gets approved. We then follow them up to make sure that the mortgage documents come in time, so you have the money to buy. A lot of settlement canâ€™t happen within 30 days anymore because banks just cannot be ready. You are looking at 60 days at the bare minimum. And that is still with a lot of chasing and hounding the bank to actually be ready.
Remember, you need to make sure your budget includes all the extra stamp duties and transfer fees, bank fees, etc. You need to make sure that the contract terms are something you can meet. So, if it says you need to pay cash deposit, you need to have that cash ready to go or donâ€™t sign it or negotiate something different. There are plenty of options, where to go to actually apply for finance. So, donâ€™t just think you have to stick to the major 4 banks and then communicate with us. It is really important that we can, we have the contact details for these people so we can chase them so we can make sure things happen.
Originally posted at www.tbalaw.com.au