Buying a home is one of life’s most significant moments.
As such, there are a number of steps you need to take before you’re handed the door keys on settlement day.
There’s a lot to consider, a fair few hoops to jump through and some critical due diligence required to ensure you’re protected.
It can be stressful and uncertain if you navigate the process without help, so here’s a few guiding tips.
First things first…
Before you get to the point of signing on the dotted line, you must spend time thinking about your financial situation and making some important decisions.
What do you want to achieve? Is this a forever home or a steppingstone towards something bigger and better down the track? Is it your first investment? How will your wants and needs change in the coming years?
Buying with future moves in mind is essential for correct property selection.
Budget is another big consideration. Simply plugging your income and expenses into a bank mortgage calculator isn’t good enough. You need to carefully consider your personal finances – both now and into the future – to make sure you can not only meet your repayments but do so without dramatically altering your lifestyle.
That calculator might tell you that you can borrow X amount, but if paying it off means you’re living off packet noodles for the next decade, you’re unlikely to feel fulfilled.
There is a difference, after all, of a banks serviceability assessment versus your affordability assessment. It must be affordable to you!
Working with an experienced and properly qualified financial adviser – in tandem with your mortgage broker – can help to capture a complete picture of your scenario and how a home loan will fit into it.
It’s tempting to rush out and start inspecting real estate listings straight away. This is the most enjoyable part of the entire purchasing process for many people.
But before you get your heart set on a place, it’s good to organise pre-approval for a loan. This will give you certainty about what you can borrow and help speed up the process once you’ve signed a contract.
And it’s at this of finding a new property to purchase and the daunting task of dealing with Real Estate agents, not to mention the frenzy of other buyers looking at the same property’s as you, that you may want to consider engaging the services of a buyers advocate, or buyers agent as they are often also known.
This can help you equalize the field by having an experienced buyer, who’s most likely been a real estate agent, but now prefers to work with Buyers rather than Sellers on your side for all things such as finding the right property, right through to the negotiations when that time comes.
But just as not all loans are equal, the same applies for Buyer’s advocates too. You need to do your research.
It’s time for your experienced mortgage broker to help navigate the hundreds of products on the market to find the one that suits you. You need to ensure you’re not paying for loan features that won’t benefit your individual situation, in addition to making sure the interest rate is competitive.
There are other finance considerations depending on your circumstances. If you’re a first timer, there are possible grants to apply for, not to mention that lenders will want to be certain of your ability to meet repayments.
If you’re self-employed, the documentation process is more complex and fiddlier. There are even loan products with terms that will exclude you from borrowing.
And if you’re upgrading from one place to another, you’ll probably need to organise bridging finance.
Like I said, it’s not as simple as going to one of those websites and filling in your details. It’s always best to get the help of an expert.
Make sure you protect yourself
Once you’ve found a place and signed a contract, it’s an exciting time… but also an uncertain one, as you navigate the winding road towards settlement day.
You must engage a solicitor or conveyancer nice and early. They will take care of the contracts, searches and transfer. It’s good to be able to hit the ground running, so don’t wait until contract day to start the hunt for your conveyancer.
After that, secure the services of a qualified and independent building inspector and pest inspector. Sometimes one company will do both. They will go over your new home with a fine-tooth comb to make sure there are no nasty surprises looming.
Consider their advice carefully and ask any questions if you’re unsure about something in their report. In some instances, you might even be able to negotiate a reduction on the home’s contract price to compensate for any structural downsides they discover.
Another important step is one that many forget until the last minute. It’s critical that you organise insurance for the new home nice and early. The last thing you want is for there to be a period when your new home isn’t covered, and a disaster comes to pass.
Also, consider other insurance products that you need – such as life and income protection. This will help give you peace of mind that the home, which will probably be your largest asset, is protect for the long-term no matter what.
Protecting your asset is important. Protecting your ability to pay for it is crucial.
For example, let’s say you’re 30-years-old, buying a $600,000 home with your partner and you earn $80,000 a year. Another 35 years of work multiplied by your annual salary means you should have a life insurance policy of $2.8 million.
Think about the long-term
A final note. Keep in mind that life can bring the unexpected, and this might see your borrowing needs change suddenly.
There could be other things on the horizon like children, taking a professional break, changing careers, travelling or investing to build wealth, that will have a bearing on your property purchasing decisions or arrangements.
Using a mortgage broker to help smooth these transitions through professional financial guidance is a smart move.