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Hi Aafreen,
Appologies for the length of the following but I wrote this for a friend when they bought their first house, I’m not intending to be patronising but some of the points may be helpful if you’re new to experience of buying real estate.
Disclaimer – I take no responsibility for the use of the below information.Never can be too careful
regards,
myoungLoans and other costs:
1. What is the interest rate? Can you split the loan amount between fixed and variable? Only fix the amount you think you have no chance in paying off within the fixed period (usually max of 5 yrs).
2. What is the application fees and stamp duty payable on mortgage registration? (You need to factor these into your loan and deposit)
3. What are the ongoing fees? (Keep these in mind as monthly fees effectively means you rate is higher than from an institution that doesn’t charge any – Wizard has a calculator that will show you this)
4. How much Stamp Duty do you need to pay on the property? (will be approx $8K to $10K for a house of $250K) Need to factor into loan. (You need to factor these into your loan and deposit) Aussie Mortgage Market has a good stamp duty calculator – search for at http://www.yahoo.com.au and select AU only on the search.
5. How much is mortgage insurance if financing above 80%?
(You need to factor these into your loan and deposit)6. What are the redraw facilities in the loan and how much is the fee (if any to redraw)? Useful if you wish to pay above minimum repayments (highly recommended to do so, prevents the bank being able to foreclose on you if you loose you job etc.) If there are no fees to redraw – put all your savings etc in the loan and redraw as needed.
7. What are the fees/penalties if you pay the loan out sooner than the term? (usually 25yrs, if you can get 30yrs do it and pay above minimum).
8. Are there offset account facilities? For Example – sit all your pay in your savings account and have this reduce the interest payable.
Loan Balance $100000
Savings account $5000
Interest calculated on $95000 rather than $100000
To earn a comparable interest rate on your savings account after tax you would need to be getting approx 10% by today’s rates.9. Do you get exceptions from any other bank fees and charges by taking out a loan with the particular institution?
10. Calculate what the minimum repayments will be at 10% and pay from day one if you can, while rates are low now – a loan goes for a long time and even since the “recession we had to have†rates have been at 10.5%. Making payments at 10% ahead of this will give you a buffer if rates spike above this.
11. Take note of when council/water rates on the house your buying fall due. At settlement, if the vendor has paid them in full from October2003 to September2004 and you buy in December and settle in February, you will have to pay them the amount of council/water rates left to go from Feb2004 till Sept 2004 on settlement day – could $500 or so you weren’t expecting.
12. Shop around for house and contents insurance – banks offer it but are rarely the cheapest. You will be required by the bank/lender to have this upon settlement.
13. Conveyancing costs anywhere from $300 to $500 dollars – this is the legal paperwork and searches on building permits for additions etc. One of Kell’s family friends is a conveyancer and has done all ours for good prices- can give you her number if you want. All Metro Conveyancing in Pascoe Vale – Joy Sanders.
Buying the House:
1. REMOVE EMOTION as best you can. Although buying your home is an emotional process, always set yourself a limit on what you will pay for a particular house and STICK to it.
2. NEVER offer what you are prepared to pay for a house FIRST TIME – the vendor will 99% of the time come back with a higher counter offer after your first offer – all part of the game.
3. NEVER let an estate agent know how high you are prepared to go on a house or he won’t take your early offers seriously – don’t forget he works for the vendor (not you) and will try to extract every last cent out of YOU. If he thinks he can get another $10K from you he will advise the vendor not to accept your offer. One EXCEPTION is if it is your absolute highest offer make sure he/she knows it. This will push the agent to try and close the sale – so they don’t have to find another buyer to make their commission.
4. Ask agents/vendors for a copy of rates notice (for council valuations). This won’t be in the section 32(only the annual rates payable is listed in this). This is a good conservative guide to the property value – replacement cost of house is easily calculated by size and quality ($4K per square for shitty building up to $10K per square for good.) If the agent is reluctant to give you this, chances are they are asking for a price well above valuation.
5. If price quoted as $XXXX Plus – assume the vendor wants somewhere between 10% to 20% more than the price quoted – agents do this just to get people from a lower price range interested in a more expensive property.
6. If a price range is quoted for a property for eg. $230K to $270K always start your offers at the low point – you can always go up, can’t go back down.
7. If it is a fixed price (ie $275,000) you could probably start your offers around 10% below unless the “long time on the market rule†applies.
8. If house is on a multiple listing and first agent won’t take your offer to the vendor because it is too low etc. Try one of the other agents the property is listed with.
9. LONG TIME ON THE MARKET RULE – If a house has been on the market for while – first offer should almost insult the vendor – very low probably 15% -20% below asking price. This will (a)give you plenty of room to move up if necessary and (b) hopefully lower the price expectations of the vendor – they should come back to you with a counter offer somewhere between your offer and what they were asking. If this goes to plan keep offering half way between what your first offer is and what they are asking – all going well you will meet in the middle.
10. Look at weekend auction results for houses sold and passed in where you want to buy. Sold houses give you a good indication of market prices. Passed in houses are opportunities to find a good deal – failed auctions make vendors nervous – especially if they have already bought somewhere else, opportunity for “long time on the market ruleâ€.
