You need to decide why you want to purchase a property?
To live in (shelter for you/family - OWNER OCCUPIED)
To rent out (rent to a tenant and become a landlord - INVESTOR).
Who will you purchase the property with and how?
Its a good idea to get some advice on how to setup the purchase of the property. For example if purchasing with another party, will you buy as JOINT TENANTS (i.e. married couples) or as TENANTS IN COMMON (i.e. buying with friends or siblings).
Who will own the property? will you buy in your individual name/s, a company, trust or self managed super fund? Each option has its own advantages and disadvantages relating to tax, ownership and use of the property.
Determine your borrowing capacity
Obtain all your income, expense, asset and liability details to determine your borrowing capacity.
Income is required to service the proposed loan. Having sufficient income is required but what about your deposit/contribution?
Expenses affect your borrowing capacity as they reduce the income available to service a loan.
Asset's in the basic form of cash, or, equity in a property (family guarantee) assist you to meet the deposit requirement of the lender. A strong asset position is not enough to obtain a loan. You must also demonstrate capacity to repay the loan.
Liability's are loans or debts that you are committed to and also affect your borrowing capacity.
When do you plan to purchase?
Are you ready to buy now? do you have your deposit/equity ready? have you located the property?
Decide how you want to structure your loan
You now know who is borrowing to purchase the property, but what about the loan options?
Your broker will educate you on the options and what may suit you best based on your goals and current situation.
Consider a few basic options:
-If you will pay principal and interest OR interest only.
-If you will fix your rate, go with a variable rate option or even split your loan.
-If you want or need the special extras available under loan packages like credit cards, offset accounts and interest rate discounts.
-The term and repayment frequency of the loan.
Obtain a pre/approval to purchase a property
Submit an application with most suitable lender to obtain written confirmation of pre/approval amount and conditions.
Decide on a solicitor or conveyancer
The services of a property solicitor or conveyancer can prove invaluable in negotiating the terms of your contract and also to ensure settlement occurs on time to prevent penalties. They will also review the contract of sale on the property you intend to purchase before finalising your offer.
Negotiate a purchase price and proceed with purchase
By now you would be working closely with your solicitor or conveyancer who would be guiding you on how to proceed and also advising you on the terms of the contract of sale and important points to consider for example cooling off periods, deposits and special contract conditions.
Meet the conditions of approval and sign loan documents
Provide evidence of your income, expenses and deposit/equity
Satisfactory valuation obtained on property
Once all conditions are met, loan documents will be issued for signing. Its important to get these back to the lender asap so they can proceed with preparing for settlement. After all, you do not want to be the party who is not ready on settlement day.
On settlement day:
-Your loan will draw down and commence accruing interest with your first repayment due generally a week, fortnight or month later
-Ownership of the property will transfer to you and you will pick up the keys
Its a good idea to make your repayments on time or call the lender asap if you expect to be late. You will need a good repayment history to obtain extra funds in the future if for example you wish to renovate, purchase another property or refinance your loan.
Consider paying more than the minimum repayment. Pay extra funds into your offset account or redraw facility. You will reduce the amount you pay in interest whilst maintaining a cash buffer for unexpected expenses, events or emergencies. It may also get you into your next property sooner.
Review your equity position, loan and goals periodically. Has your property increased in value and therefore increased your equity in the property providing you access to funds for a personal expense, renovation or deposit on another property? Is your loan still suitable or is there a better option? Do you plan to keep the property, sell or upsize/downsize?
Contact us now if you wish to book an appointment or discuss any of the above.