Archive for category: Budget, Loans & Deposits

Buying or Building a Home? Look Before You Leap

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excavator in front of a house under construction

Buying a home is the largest financial commitment most people make during their lifetime, so it makes sense to spend some time researching every aspect of home ownership before making any decisions. Many potential buyers make the mistake of looking for their ideal property first, bypassing the initial planning, which may not be as exciting as house hunting, but if done well, saves a lot of anxiety later.

Carefully Check Your Finances

The most important step is to take a realistic look at your financial situation. Whether you are building or buying an existing property, a mortgage is a necessity and one that is likely to take many years to pay off. It is not enough to look at your current income and assume that it will be sufficient to cover the mortgage and expenses. You need to ensure you can meet these commitments over the term of the loan.

Include ALL Costs in your Budget

You should also remember that whether building or buying, there are additional costs to be met before any property settlement takes place. These costs should be carefully researched and included in your budget. Government stamp duty, building inspection and conveyancing fees, moving costs and connection fees for utilities like water and power are just some of the likely costs to budget for. However, there could also be some government grants and concessions available to you depending on your situation.

Keep Comprehensive and Accurate Records

You should keep records, either paper-based or digital, of every aspect of your journey to home ownership. Over the weeks and months of the search until you finally move in, you will speak to real estate agents, building experts, legal experts, local government employees and others. You will gather quotes, copies of contracts, building plans and other documents which you may need for future reference. It is quicker and more efficient to keep it all in one location.

Only Deal with Experts

Remember also to get expert advice, especially if you are new to purchasing property. As you start working your way through the process, you will have dozens of questions, and while some may be easy to answer, others will need investigation and the opinion of people with relevant qualifications. Getting the right advice first up will save a lot of problems later.

Our real estate agents here at Bunbury Real Estate have the training and experience to find the perfect block of land, house or apartment for our clients. We are members of the Real Estate Institute of Western Australia and we have received many industry awards for our professionalism over a period of years. Our staff are ready to assist you in your property search.

Not All Covid Consequences are Medical

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covid-19

There is no doubt that the current COVID pandemic continues to impact on all sectors of the economy, with the hopes of the nation now pinned on the success of the continuing vaccination roll-out. The first lockdowns early in 2020 saw thousands of employees without work as temporary business closures became necessary to contain the virus.

Lowered Mortgage Interest Rates Enacted

At first, it appeared that the economy would be severely affected but the Reserve Bank and both levels of government put in place a range of policies to support the domestic economy. These policies affected almost every corner of the economy directly and indirectly, including the property market. For example, the monetary policy enacted lowered mortgage interest rates, which in turn, appears to have played a big role in increasing property prices.

Six Month Deferral on Loan and Mortgage Payments

Other initiatives were put in place to support mortgage holders, whose employment was compromised, including a six-month deferral on loan repayments. The Australian banking industry also advised that borrowers who were granted these deferrals, would not have their credit rating affected as a result of the deferrals, provided they had been up to date with their repayments prior to the pandemic.

All of these measures were successful in supporting the economy and for some time, the spread of the virus was limited to specific areas and situations.

Further Assistance Still Available Where Needed

However, there have been on-going lockdowns and border closures in 2021, especially in New South Wales and Victoria. The effects of these lockdowns and closures prompted lenders to again offer some financial relief.

There is a range of assistance available for small businesses including loan repayment deferrals, and both business owners and individuals can apply to their lenders for repayment deferrals on their mortgages.

Mortgage Stress Statistics Show Improvement

New research published in July 2021 shows that 17.3% of mortgage holders experienced some level of mortgage stress up to and including the end of May 2021. This is a welcome reduction to the level of mortgage stress experienced in the previous 12 months which sat at 19.4% early in the pandemic.

Conversely however, there are still many workers experiencing disruption to their normal working hours and hence their income, and in this group, mortgage stress is 19.9%.

Here at Bunbury Real Estate, we had similar disruption to our business and the lives of our staff and clients in the early stages of the pandemic. However, our state has been able to control the spread of the virus and although our borders are temporarily closed, both the property management and real estate sales sections of our business are still successfully operating.

Home Loans Don’t Have to be Complicated

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Are you hoping to buy a home but are apprehensive about the process of securing a home loan? It can be confusing as there are many lending institutions in the market, as well as mortgage brokers and others for whom home loan products are a key part of their business. The criteria they use to assess your application can vary from one lender to another, but they also have a basic set of eligibility conditions that are the same for all. A good place to start is to check if you satisfy these basic requirements.

Age Eligibility and Residency Status

The minimum age for eligibility for a home loan in Australia is 18 years. There is no maximum age as long as the borrower can demonstrate the ability to repay the mortgage without incurring financial hardship in accordance with the principles of responsible lending. The applicant must also be an Australian citizen or permanent resident, or married to, or in a de facto relationship with an Australian citizen or permanent resident.

Checking Your Employment Information

All lenders will assess your ability to repay the loan by asking for employment information. For PAYG employees, the three most recent pay slips and current tax returns will be required. They may also look at your employment history to establish if you have a reasonable level of employment stability. Generally, a lender will look more favourably on an application from someone in full-time employment rather than part-time or casual work.

Can You Afford to Repay the Loan?

They will also assess your monthly expenses to ascertain your ability to repay the loan, including any other existing debts such as credit cards or personal loans. They are looking to see if your living expenses are higher than average, and how much disposable expenditure you have left after servicing these expenses and debts.

Our sales professionals at Bunbury Real Estate are experienced at finding the perfect properties for their clients, but they are also often asked questions about the process of getting home loans. They advise clients to seek this information from experts in lending, as the knowledge they have about home loans is only general and may not be appropriate.

A Good Deposit and Some Extra Savings is a Plus

Most home lenders will lend up to 80% of the value of the property, leaving a cash deposit of 20% to be paid by the loan applicant. However, some lenders may consider the application of someone who has less than 20% if they are willing to pay for the Lenders Mortgage Insurance (LMI). Additional savings in their bank account will also assist loan applicants to cover additional costs such as conveyancing fees and land transfer (stamp) duty which is applicable in Perth.

Do This Before You Even Think About Buying Your First Home

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checklist written white notebook

Buying your first home is one of those life occasions that can invoke both excitement and terror, both at the same time. The excitement is dreaming big and spending days looking at property until you have some knowledge of your local real estate market. The terror is the reality of signing up for a mortgage that may take years to repay.

Where to Start?

The starting point is to find out how much money they can borrow. This will vary depending on individual incomes, the size of the deposit and the policies of various lending institutions. Saving enough for a reasonable deposit is a big obstacle for first home buyers, so most state governments have a range of assistance programs. For example, in Western Australia, eligible applicants can access up to $2,000 to help reimburse them for incidental expenses associated with purchasing a home.

Incidental Expenses Plus a Deposit – Are You Kidding?

What are incidental expenses? As if saving a deposit wasn’t hard enough, other costs that need to be covered are mortgage registration fees, conveyancing fees, valuation and inspection fees, mortgage insurance premiums and lending institution fees. This is not a complete list as these costs can vary from state to state and this program may not be available in every state.

State Government Grants to Help Out

The biggest assistance package for first time home buyers is the First Home Owner Grant that is offered by most states, including Western Australia. The grant provides up to $10,000 to those eligible, and again, this amount can vary from state to state. This is an excellent boost to the finances for those buying their first home. There may be time limits on the application process, so it is wise to check the eligibility criteria before making any decisions.

Our property sales professionals here at Bunbury Real Estate know our local market and are ready to assist first home buyers find a suitable property at a price they can afford. We also can help with general information about these grants and other actions that buyers should take before deciding on a property, but as in most matters, they should also seek other independent advice.

Keep Some Extra Cash Aside

This could be in the form of valuation fees and building and pest inspection fees to check for faults or other problems. Stamp duty is levied by the state governments, payable by the buyer and is calculated on the selling price. Buyers should also insure the property immediately they sign the contract of sale. Calculating these costs in advance and setting money aside to meet them will allow the first home buyers to enjoy their new home without immediate financial stress.

Do Your Research Before Buying Your First Home

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buying a home

Buying your first home is one of life’s most exciting experiences. Most buyers get caught up in all the obvious activities such as selecting a location, inspecting housing stock, planning renovations and shopping for furnishings to suit their chosen property. With some basic knowledge of lending practices, they have also secured a mortgage and have moved into their first home.

What They Didn’t Know

A few years later, with more information and experience behind them, many of these buyers would now admit that there were some important things, had they known them at the time of purchase, would have changed the way they approached their quest.

A Mortgage is Just the Start

The first thing they would have done differently is to monitor their spending habits. Although they had saved a deposit, they underestimated their spending preferences. They were able to cover the mortgage, but other regular expenses attached to home ownership such as property rates, insurances, repairs and maintenance were a struggle until they controlled their spending. In hindsight, they should have created a realistic budget, which included the non-essential purchases that they had to forgo to achieve their home ownership dream.

Don’t Fritter Away Your Deposit

Some buyers underestimated additional costs that ate into the deposit they had saved. Fees and charges, such as stamp duty, transfer fees, building and pest reports, conveyancing costs and solicitors’ fees can amount to thousands of dollars. The better alternative is to research these costs and save extra money to maximise your deposit. If additional costs are chipping away away at your deposit, you need a good strategy for setting up a budget.

These are all issues that we are familiar with as property managers. At Bunbury Real Estate, we spend time with prospective buyers to find out the types of properties they would like us to show them. We also do our best to qualify each client to make sure that we are not wasting their time showing them properties that are out of their price range.

Pay Extra Each Month and Shorten the Loan

Many buyers wish they had understood more about the actual cost of the interest on their home loan at the start. Those who paid the minimum off their mortgage each month were not really getting ahead, while those who paid more than the minimum were reducing both the principal amount of the loan and the interest. This also shortens the term of the loan if the extra payments can be sustained over time.

Insure It Before You Own It

Finally, most first-home buyers did not know that they needed to insure the property they had under contract, even though they were weeks away from settlement. This was an unexpected up-front expense, but essential to protect their financial interest in the event that the property was damaged prior to finalising the sale.

Buying First Or Selling First – A Constant Conundrum

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buy a house first or sell first

One of the regularly debated issues in residential real estate is whether it is best to sell first before buying another property, or better to buy something else before selling. This is the dilemma most sellers face once they have made the decision to place their home on the market, and unfortunately, there is no definitive answer. It depends on individual circumstances.

When Buying First There is No Urgency to Sell

When sellers plan to buy another property first, there is no urgency for them to sell their current property. They still have a comfortable place of residence from where they can search for their ideal next home. They are also in an excellent negotiating position, especially if the seller is under pressure to get a quick sale.

Buying first means no regrets for a missed opportunity. And if the circumstances are right, there is also the option for capital gain on both properties in a rising market. It also means that there is no nightmare rush to vacate the original property before settlement. This allows for a leisurely and stress-free move to the new property.

Buying First

However, there are some traps when taking this route. For example, securing a loan for the second property will place sellers in the position of having two mortgages. If the original property should be slow to sell, the financial strain may force a sale at a reduced price. Also, sellers may not have the option of buying first if their lenders require that the original property be sold first.

Our sales professionals at Bunbury Real Estate deal with these issues every day. They know whether market conditions are weak or strong, and if the type of property the client is looking for is available in their search area. Clients researching the pros and cons of buying first or selling first should discuss their situation with one of our sales professionals so they can make informed decisions.

Selling First

Selling first gives the owners time to research the market and settle on a price, and to prepare the property for sale. They have the flexibility of considering offers and negotiating settlement terms that suit them. Financially, they would be more attractive to lenders when applying for a mortgage for their new property.

Don’t Wait Too Long

Regardless of whether the market is moving or stable, the golden rule in this situation is, if possible, to buy and sell in the same market and not wait too long to secure the next property. If property prices rise sharply, sellers could be left unable to afford the homes they had hoped for. Neither choice of selling first of buying first is wrong provided all circumstances are considered before deciding.

Are You Considering Future-Proofing Your Investment Property?

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building house rolled up house plans

Property investment across the country is still generally sound, despite the difficult year just gone. As a society and an economy, however, we have learnt the hard way that we should always be prepared for the unexpected. We should always have a Plan B – just in case.

Short-term vs. Long-term Tenancies

Residential property investors have generally had a steady cash flow as the demand for rental accommodation has been strong. Indeed, they have not usually been forced to choose between short and long-term tenancies as both options have been available. However, the times are changing.

Flexibility a Key Benefit

There are some advantages to short-term tenancies for owners. Flexibility is a key benefit. The property can be used by friends and family for short periods between tenancies. Bad tenants can be moved on quickly. If a lucrative long-term opportunity comes along, the owner can move back to a long-term arrangement.

Higher Rental Returns; Less Wear and Tear

Short term rentals often attract higher rental returns, especially in competitive locations. There is less wear and tear as the properties are inspected, cleaned and repaired after the end of each tenancy. Also, the owners have the flexibility to sell the property at any time as they’re not locked into a long-term tenancy.

Our professional property managers at Bunbury Real Estate work hard to ensure that our property owners maximise their rental returns – both short- or long-term rentals. Every property is given the same care and attention. All tenant references are thoroughly checked.

Long-Term Rental Income Security in Uncertain Times

None of these benefits are as important as security for some investors, especially in these uncertain times. Many owners are relying on the rental returns to pay the mortgage on their investment properties. They prefer the stability of long-term lease agreements with a set date. This allows them to plan their cash flow as the rental income comes in at a constant rate. They also are not vulnerable to off-season variables that may see their properties vacant for weeks at a time.

Fewer Costs, Simpler Management Arrangements

In addition, owners have fewer costs as long-term tenants usually pay for utilities. Properties are not being advertised every few weeks or months. Owners are not refurbishing or paying clean-up costs as often as short-term rental owners. Long-term owners are also not interacting regularly with their property managers.  For them, this arrangement makes managing their investment simple and stress free.

A Disciplined Approach to Saving for a Home

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blue piggy bank

Those who dream of eventually owning their own home need a starting point to focus their energies, and for most people that starting point is a house deposit. With house prices in the hundreds of thousands of dollars, having a reasonable deposit gives the prospective homeowner financial credibility when shopping around for a competitive housing loan.

Establish a Savings Plan

For a significant number of people, the story ends here because they either lack the discipline to establish a savings plan or they do not know how to do it. They may have the goal of home ownership clear in their minds but unless this becomes actions that see dollars accumulating in their bank account, they will continue to be tenants.

Let us see if we can help. Our sales staff here at Bunbury Real Estate are professionals with industry expertise and local knowledge. While they are also experienced negotiators, they are not financial advisors. However, they know from listening to clients that it is possible to save for a house deposit, and good financial discipline is the key.

Create a Purposeful Savings Account

Now, we have assumed that our savers have researched the real estate market, know what they can borrow based on their current income and have a dollar figure in mind that will become their deposit. The first thing to do is to set up an account just for this purpose, separate from the money used for living expenses. You should be aiming to never withdraw from this account unless it is for a home deposit.

Construct an Achievable Budget

The next step is to create an achievable budget that still leaves room for discretional spending. The internet is a great resource for showing you in detail how to do this and make it authentic. There is no secret formula. It is all about increasing your income and reducing your expenditure. On the income side, for example, you could get a second job or go through your possessions and sell unwanted items.

Set Spending Limits and Change Some Lifestyle Habits

On the expenditure side, you must be disciplined enough to set spending limits and stick to them. This usually requires a change of lifestyle where eating out becomes a once a month treat instead of a twice weekly occurrence. This is just one example. Others include bringing lunch to work from home instead of buying it and preparing home-cooked meals instead of ordering takeaways.

This becomes easier once you see these savings building up in your house deposit account. If you do this consistently and bank unexpected income like a tax refund, you will soon be asking our agents to find you a home.

Important Tips When Buying Your First Home

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You are investing hundreds of thousands of dollars when you purchase a house. When it is your first time, the task seemed especially daunting. It’s tempting to just purchase the first house you see that you like. As a first-time home buyer there are a lot of things for you to consider in order to minimise your investment risk. You need to know what the requirements are for first-home buyers and what to expect during the buying process.

Here are some things first home buyers need to know to prepare them mentally, emotionally and financially for the buying process:

Important factors to consider

These are the things you need to consider when purchasing your first home to ensure that you are making the right decisions.

Lifestyle – Ask yourself these questions to help you find the home that best fits you. How do you live day to day? What are your future plans? Are you going to upsize or downsize in a few years? Do you want your home  to be located close to amenities and services? How far from schools or shops are you willing to live?

Financial situation – Calculate the total amount of your repayments and related costs before taking the plunge. Save as much as you can for your deposit to reduce your monthly mortgage payments as much as possible. When calculating how much to borrow, estimate your current expenses, potential mortgage repayments and related costs such as water and council rates, and determine if your income can fully cover all these expenses.

Moderate your expectations – Getting into the property market is already an accomplishment, so don’t be frustrated or discouraged if the house you’ve been dreaming about is out of your reach. You would probably be one of those many people who purchase not just one house in their lifetime.

Do your research – Find out important facts about the property such as how much it was sold earlier, what changes had been made to it, what type of zoning it is covered by, etc. Check from the council whether there are major developments planned for the surrounding areas that could affect the value of your property. It also doesn’t hurt to be updated on the local news affecting the area where your property is located.

Grants available to Australian first-home buyers

There are several financial assistance products available when you purchase your first home.

First home buyers grant – Eligible first home buyers can avail of a grant when they buy or build their new home that will be used as their primary place of resident.

REBA $2,000 home buyers assistance – Eligible home buyers are entitled to a grant of up to $2,000 for the related costs of buying their first home, whether established or partially built, made through a certified real estate agent. The highest purchase price requirement for the Home Buyers Assistance Account (HBAA) is $400,000.

First home super savers (FHSS) scheme – With the closing of the First Home Save Accounts, the Federal Government launched FHS, which allows first home buyers to save for their deposit within their super fund.

Stamp duty concessions – Stamp duty is part of what you pay when buying residential property. Those who are eligible for the First Home Owner Grant can also claim a concessional rate of transfer duty if the dutiable value of the residential property and land is up to $530,000 or $400,000 for empty land.

Steps for Purchasing a Home

You have to know what to expect from the home buying process if you have decided to go ahead with it. Preparation is the key to avoiding hassles, stresses and delays that might derail the entire transaction. Here are the basic steps you can expect from the buying process:

Find a home – There are many ways for you to find what properties are for sale, including listings from real estate agents, online listings, and even driving to areas where you desire to live. Friends, family and corporate connections can also let you know if a property that may interest you goes up for sale.

Secure financing – But not before checking what type of home loans as well as first home buyer grants are available to you. Do your research and shop around because because your mortgage interest rate will heavily impact the final amount you will pay for your home.

Make an offer – Your offer will be presented to the seller’s agent by your real estate agent, who will also help you come up with the amount of the offer. Once your offer is accepted, the legal process of buying property has now started, including providing a good-faith deposit and the shift into escrow.   

Get a home inspection – Have an experienced professional inspect the property you are buying even if it appears perfect. Knowing the overall condition of the property helps you in the negotiation process and gives you a sense of security knowing you’d be making the right decision for your prospective investment.

Finalise transaction or move on – It’s time to close the deal if all went well with the seller, or if the inspection didn’t find any major problem in the property. If it is the opposite, then move on to another better-suited property for you.

Things are not quite over even after you have closed the deal and you have moved all your belongings to your new place.

It is important to learn the buying process beforehand to lessen the stress as you’re going through with it and to help you get that dream house at a price that you can afford.

Moving To A New House? Be Prepared For Extra Costs

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Whether you are planning to move from your existing dwelling into your own home or another rental, your head is probably already filled with dozens of things you need to do. There are all kinds of details to remember before the moving van arrives and forgetting any of them could mean that your move becomes a logistical disaster.

Establish a House Moving Budget

Chief among them is the cost, and unless this is known beforehand, and money set aside to cover it, your first experience in your new home could be the shock of an unexpected bill. To those of us who don’t manage money well, budgeting is boring, but when moving house, it is just as essential as advising everyone of your change of address.

As a real estate agency specialising in both sales and rentals, we have seen quite a few clients financially overstretched because they didn’t cost everything in advance. At Bunbury Real Estate, we are expert at helping people find properties that suit their life styles but we can only advise that moving can be expensive, and suggest they stick to a budget.

Sell Things you Don’t Want

The most effective way to get the most out of your moving dollar is to be aware of the hidden costs of moving and plan some strategies to avoid them. For example, don’t take things with you that you don’t want. Donate them, sell them online or have a garage sale. You will get some extra cash in hand, and you won’t be paying for the extra space to transport them, only to throw them out when unpacking.

Don’t Waste Money

Don’t buy anything new now but wait until you have moved in and lived in the property for a while. A bargain piece of furniture now may be a waste of money if it doesn’t fit when you move into your new abode. Also, if you have subscriptions such as pay TV, cancel them now and put the savings towards your moving expenses.

Do Your Own Cleaning

Most rental agreements require that you get carpets professionally cleaned before you leave. However, doing all the other cleaning yourself, including mowing the lawn and tidying the garden, will save you hundreds of dollars. Use this to offset the cost of professional movers, who are experts at packing and protecting your important pieces.

Move Outside of Peak Hour

Another suggestion is to plan the move outside of peak hour. If your removalists or truck rental company charge by the hour, sitting idly in a traffic gridlock is a waste of money. Also, make sure all your possessions are insured while in transit, especially if you are moving yourself. Traffic accidents are a fact of life, so make sure you are covered.