There are many guides available online or consults conveyancing solicitor. This post details my own experience and contacts through the buying process - I am borrowing 80% of the purchase price for a vacant land, which I intended to build soon after.
My conveyancing solicitor is Tracey Tran at Legal Life Lawyers, because she personally went through the same process of purchasing vacant land and building. You can avoid alot of financial mistakes by following someone else's footsteps.
- Do your math (properly) - make sure you have an accurate and detailed budget which takes into account all expenses associated with property purchase, including stamp duty, council rates, and other fees.
- Do not stretch yourself to your limit - make sure you fully understand the impact of your regular spending levels on your new budget, and allow room for interest rates to rise or for some unforeseen additional spending. Consult your lender or financial planner if you have one. For me, my wife does all the maths because she is good at keeping record of our money.
- Make changes to your lifestyle - a mortgage is a big commitment and you may have to make changes to your regular spending practices if you are to meet your repayments with ease.
- Take the time to consider a variety of product alternatives - think very carefully about the product offerings and how this relates to you and your spending habits. There are a number of products on the market and its important that you find a product that best suits your needs. InfoChoice website will help you find the right product for your circumstances. If you are borrowing more than 80%, you will need to pay mortgage insurance.
- Consider options - such as a 100% offset account to help you repay the loan faster and avoid the very expensive costs associated with long term debt. Choosing fortnightly repayment can reduce your loan by 6-years!
- Back to basics - managing a homeloan is a big commitment, and it's important to be realistic about what you agree to borrow and what you can afford. Your leader will advise you how much you can borrow factor in your expenses and current debts.
- If you are in trouble, ask for help - if you do not think you can keep meeting your mortgage payments, contact your lender immediately. Do not wait until your lender is forced to be involved in facilitating a solution. In many cases, a proactive solution can be negotiated if your lender is given the opportunity to work with you. At the end of the day most lenders would rather try to help you through your short-term issues and keep you in your home. Why? Because broker get commission of 0.66% upfront for each homeloan application and 0.22% monthly for the life of your loan. My broker is Paul Nguyen at Specialist Home Loans, this is my second homeloan with Paul and I'm very happy with his prompt service.
- So you found a property, what's next? - use your negociation skills to get the vendor to agreed on a purchasing price. When the property is enlisted with the agent, there is always a $10k-$20k margin on top of the actual price for potential buyer to bargin. Don't rush, do your reasearch on your chosen location for at least 3-months. We hunt in Canley Heights, Cabramatta, Canley Vale and Bankstown for 18-months!
- Review the contract - once the agent understands that you have real intention to buy, ask for a copy of the contract. Give the contract to your conveyancing solicitor to review and address any concerns. Terms of contract may be amended, ask your solicitor if you are not happy with certain conditions.
- Exchanging contracts - once you are happy with the contract, ask to inspect the property as many times as you wish. When you place the 0.25% deposit with the agent, the cooling-off period effect immediately. You have the allowed period to seek formal or unconditional approval from your lender. Within this period the you (the Purchaser) can change your mind and stand to lose the 0.25% deposit, but the Vendor can not change their mind. Read this article for more details.
- Payment of deposit - upon the lender's formal approval in writing. You can purchase a bank cheque address to the real estate agent for the remainder of the 10% of the purchase price.
- Settlement - when you are the first homebuyer, you are entitles to the NSW Goverment First Home Owner Grant. Otherwise you have to pay stamp duty. Your conveyancing solicitor will assists you through paperwork in this process. The remainder 10% is payable to the Vendor, based on his/her instructions.
Remembering that purchasing property is your biggest liability, your property will remains the bank's asset for the life of your mortgage (the term mortgage comes from the Old French words mort, "dead," and gage, "pledge").
So be smart and "pay off your homeloan before making any other big investments."