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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.

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.

Don’t Let Your Unoccupied Property Drain Your Finances

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If you have one or more investment properties, it is vital that you keep the vacancy rates as low as possible, given the locations and local market conditions. An unoccupied property is a drain on the financial resources of the owner, is more likely to be vandalised and becomes an insurance issue after a specified period.

Getting a Property Leased Quickly Needs Several Approaches

Finding quality tenants quickly in any kind of market is not something that can be achieved with only one strategy. It takes a concerted effort using several different approaches that, when combined, gives the owner the best possible chance of securing a long-term lease.

When we manage a property on behalf of a client, this is the approach we take. At Bunbury Real Estate we use current rental data to keep in touch with the local market and the latest marketing techniques to advertise our properties. We also keep our property owners up to date so their rental price expectations match the market conditions.

Use Accurate Data and Set Firm Targets

This means rental appraisals must be accurate. Data that is months old is not a true reflection of what is happening now. If, for example, the market is slowing down, we need to be advising our clients on current data, or they will be expecting a rental price that was achievable six months ago, but not now.

Getting a property occupied quickly also means setting targets and acting on them. The number of enquiries within the first couple of days the property is advertised is a reliable indicator of how much work will be required to get it leased. If there is little or no interest and we know the property is overpriced, we request a rent reduction from the owner. This usually brings in enough tenants for us to reference check and recommend.

Advertise Any Changes

This brings us to the next important change. There is little advantage in reducing the rent if we don’t advertise it. People who are watching the property but have not enquired may respond to this drop, so featuring it in our major advertising is critical.

Long Gaps Between Leases is a Cost

Our most important strategy is the relationship we have with the property owner. This includes giving good advice and finding reputable tenants. When an owner is reluctant to reduce the rental price, we remind them that every day the property is vacant is a cost to them. An extra $10 or $20 a week will be eaten up in costs if the property is not quickly leased.

If you are self-managing your investment property and losing money between leases, give us a call. We will use our knowledge to get your property leased quickly for the best price in any kind of market.

What Would Make You Sell Your House?

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For previous generations, buying a home was a once-in-a-lifetime event, and selling it a reluctant response to something that left no other choice. As the workforce became more mobile, and social changes redefined the family unit, the notion of a “forever” home was challenged. Home owners are now willing to sell their properties for a range of reasons as diverse as they are practical.

Moving up to Something Bigger

Up-sizing and downsizing are the opposite sides of the same coin, that is, the desire to have just the right amount of space for current needs. The typical home owner who sells a property to move to a bigger one will usually have a growing family who need their own bedrooms, or be caring for elderly parents or perhaps running an expanding home-based business.

Free up Cash by Downsizing

Downsizing is usually a lifestyle decision by older people whose families have grown up and left the family home. They no longer need the extra space or the work involved in keeping a large property clean and well-maintained. Selling up and buying something smaller also frees up much needed cash, which is useful in later life.

We have helped clients to both up-size and downsize, but these are not the only reasons people decide to sell their homes. Real estate is very much a people-centred industry, and here at Bunbury Real Estate experience has shown us that almost every decision to sell is driven by some change in personal circumstances.

Changes in Work Circumstances Trigger Sales

Work, for example, is a major part of our lives and very important to our financial and personal wellbeing. Many sales are a result of changes in work circumstances. We have worked with clients who needed to sell because they were moving interstate to a new job, which is always exciting. Sadly, we have also helped clients who needed to sell because they had lost their job and could not manage the mortgage repayments.

Relationships and Family

A change in relationship status that triggers a property settlement is another personal circumstance that will cause homeowners to sell. A separation or divorce is a common reason for contacting our agency to list a property. So, too, is the need to be closer to family during such a difficult time.

Not the Old Neighbourhood?

Sometimes the change is just one of personal preference. This typically happens when a neighbourhood that has been home for many years, changes to a completely different demographic. For some long-term residents, it just doesn’t feel like home anymore, and they sell their property and move to somewhere that better suits them.

Whatever the reasons, we are always available to help people find their perfect place, whether it is an apartment, a duplex, a free-standing house or semi-rural property.

Finding Your Piece Of Paradise

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We all have our own ideas about what constitutes the perfect living environment and what suits one person may be the last place in which someone else might want to live. With such a wide variety of real estate options available it would only be the most difficult buyer who could not find a place to call their own. Whether it be beachside, riverside, acreage, town or city living, high in the hills, in suburbia or off the beaten track, there is a property to suit everyone.

Variety is the Spice of Real Estate

It is this variety and the opportunity to meet and assist people from all walks of life that makes real estate such an exciting industry to work in. At Bunbury Real Estate our people are experienced in identifying the most desirable areas in which to live. While there will always be that unique person who wants something totally different from everyone else, there are a few attributes that most buyers want when they go house hunting.

The Modern Dream Now Peace and Quiet?

This is for a place to retreat from the responsibilities of work, to recharge the batteries and to seek out privacy from being switched on 24/7. Doing this in a peaceful environment while still having all the modern facilities is the dream.
We think there is no better place to fulfil this dream than Bunbury, but to find out for yourself, we have some suggestions for finding the right place for you. First, make a list of the things that are important to you in your daily life. For instance, do you want to live close to water, to have views from your home, to have facilities close by or are you prepared to forego convenience for privacy and a natural environment?

Ask Yourself the Hard Questions

Are you prepared to drive a reasonable distance to get to work? Do you want neighbours close at hand, or would like to put some space between your property and the one next door? Do you want to spend your leisure time at a frenetic pace, or are you ready to chill out and wind down?

Don’t Settle for Less

No one can answer these questions for you. You must make your own decisions about what you want. If you allow yourself to be pressurise into buying a property in an area that does not meet your most important criteria, you will not be happy there, and the very things you were seeking will escape you.
There is something for everyone in Bunbury and if you want to spend time with us to find your ideal property, we will find a suburb or location that ticks your most important boxes.

Balance The Risk And Returns Of Property Investment

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It has been repeated time after time.

  • Investing in the property market is a safe bet.
  • Investing in property is guaranteed returns.
  • You’re investing in something you can see, touch and smell.
  • Investing in property equals big tax incentives.

There are more but you get the idea.

As responsible Real Estate Agents and Property Managers Bunbury Real Estate feels it prudent to assist our customers in making an informed decision.

The Risk and Pitfalls

The risk on an investment usually refers to the amount of money being injected into the deal. The more cash you have of your own the less the risk. Therefore, it makes sense that it follows that the more you borrow the greater the risk.

The pitfalls of the investment can be many and varied depending on each individual case. The more common pitfalls are:

  1. Large entry costs by way of stamp duty, pest and building reports, conveyancing and transfer costs, and legal costs including searches.
  2. Ongoing repairs and maintenance
  3. Council rates
  4. Water rates
  5. Insurance
  6. Body corporate fees
  7. Land tax
  8. Management Fees

The Returns

Alright now! We’ve done the main course, let’s get down to the cake!

In the same way you would calculate the many facets of risk, you must also study the level of investment returns. It is only when these two things are in balance in YOUR world, should it be right to move forward with ANY investment.

So what aspects should you consider when calculating the real and forecast rewards we speak of?

The three main aspects to consider are:

  • Rental Income
  • Tax Benefits
  • Property Growth

For some investors, taking a hit on income for high growth could be a winner. For others, it may be having that long-term investment that actually contributes to your income.

As the owner of an investment property you are able to claim against the expenses on all the items listed above in Risk and Pitfalls against any income received, over the term of ownership.

The other great advantage is being able to depreciate all the items held within the property such as hot water systems, floor coverings, air conditioners and many more.

On a Final Note

Whilst we may be a little biased in believing property is the best kind of investment, we also believe and recommend diversifying your portfolio as another method to assist in balancing your risk and return.