Buying property in Sydney and Melbourne can be an exciting yet complex process. Given the dynamic nature of the real estate markets in these cities, potential homebuyers must navigate through various steps carefully. This guide will outline the crucial phases you must follow, from buying a house and committing to a purchase to moving into your new home.
1. Commit to Buying a Property
The first step in buying property is deciding to commit to the entire process. Owning a home is a significant milestone and a major financial decision requiring long-term planning and commitment. Ensure that you are ready to take responsibility for the additional costs of homeownership, including the ongoing maintenance, building insurance, rates, and mortgage repayments.
Committing to buying a property is the initial and one of the most crucial steps. Recognise that homeownership is more than just acquiring real estate—it’s an investment in your future. Prepare for the upfront costs and long-term financial responsibilities like council rates, insurance, and regular upkeep.
Consider lifestyle stability: How long you plan to live in the area, job security, and family planning. This commitment requires understanding both the joys and obligations of owning a property.
2. Organise Your Finances
Before entering the property market, it’s important to get a clear picture of your financial status. This means reviewing your savings, current expenses, debts, and overall financial health.
Create a detailed budget for all your monthly expenditures and potential savings. Check your credit score, as it will significantly impact your loan terms and interest rates. You can do this via Equifax as this is the same credit report that most if not all lenders use.
Make sure you consult a financial adviser who can provide you personalised advice, helping you optimise your budget and improve your financial health to better position yourself for a loan application. Consider speaking with a financial advisor or a mortgage broker to help structure your budget and savings plan for buying a home or paying down your debts faster.
3. Determine Your Borrowing Capacity
Your borrowing capacity will depend on your income, debts, financial commitments, and current employment status. Contact multiple lenders or a mortgage broker to discuss your financial situation. They can give you a more precise figure and advice on improving your borrowing power.
Your borrowing capacity is not just about how much a bank will lend you, but also about how comfortably you can manage repayments without compromising your lifestyle. Use online mortgage calculators as a preliminary tool to estimate your borrowing limit right loan amount. Remember, the more detailed and accurate the information you provide to lenders or brokers, your borrowing estimate and loan documents will be more realistic.
4. Plan Your Deposit and Search for Grants
In Australia, you typically need a deposit of 10-20% of the property’s purchase price to facilitate a successful home loan application. However, first-time home buyers in Sydney and Melbourne may be eligible for various grants and concessions, such as the First Home Owner Grant or stamp duty reductions, which can help manage the upfront costs of residential property. Research and apply for any grants you qualify to reduce your initial expenses.
Saving for a deposit often involves significant financial discipline and long-term planning. Explore options like high-interest savings accounts, term deposits, or even shares if you’re comfortable with some risk. All of these options are there to counter inflation so that way you are not going backwards with your ongoing costs and savings plan.
In addition to personal savings, look into eligibility for government incentives such as the First Home Super Saver Scheme, which allows you to use voluntary superannuation contributions towards your deposit.
5. Select the Best Mortgage Option
Choosing the right mortgage is as important as selecting the right home. Numerous mortgage products are on the market, each with its pros and cons. Options include fixed-rate, variable-rate, interest-only, split home loans and more. Compare the different mortgage products available and choose one that suits your financial situation and risk tolerance.
We would always recommend that you engage the services of a professional mortgage broker when you are at this stage as navigating mortgage options can be complex.
Fixed-rate mortgages provide payment stability, while variable-rate mortgages offer flexibility and can be cheaper if interest rates drop. Interest-only loans lower payments in the short term but cost more than long-term debt over-term. Always consider the loan’s features, like redraw facilities or offset accounts, which can significantly affect interest paid over the life of the loan.
6. Obtain Pre-Approval
Mortgage pre-approval is an essential step in the home-buying process. It helps you better understand what you can afford and allows you to move quickly when you find the right property. Pre-approval involves a lender assessing your financial situation to determine how much they will lend you.
Advice from a Professional
‘Having pre-approval can significantly enhance your property search by setting a realistic budget and showing agents and sellers that you are a serious buyer. It can also speed up the final loan approval process once you’ve made an offer on a house. Always ensure that your pre-approval is up to date and reflects your current financial situation’. James Haywood – Approved Finance
7. Begin Your Home Search
Now that you have financial pre-approval start searching for your ideal property in Sydney or Melbourne. Consider factors such as investment property, location, and proximity to amenities, public transport, schools, and work. Use online property portals and real estate agents, and attend open houses to find properties that meet your criteria.
When searching for your home, think beyond the property itself. Research the neighbourhood, local schools, future infrastructure projects, and area growth forecasts.
These factors can affect your property’s value over time. Use tools like virtual tours and attend multiple open houses to get an authentic feel for the market and what you can get within your budget.
8. Arrange for Building and Pest Inspections
Once you find a property that interests you, arrange for building and pest inspections. These inspections are critical for home buyers as they can identify potential issues that might not be noticeable during a casual walk-through. The building inspection and pest report can also be a powerful negotiating tool or save you from investing in a property with significant hidden problems.
Never skip the building and pest inspection, regardless of how perfect a home seems. These inspections can uncover problems that could cost you significant repairs down the road. If issues are found, they can also be a bargaining chip in negotiating the purchase price with the home buyer.
Advice from a professional
‘I always recommend that people attend as many auctions as possible so they can get used to the environment before they enter an auction scenario where they are planning to bid. That way they know what to expect because the agents job is to push you to make an offer and agents have different ways to do this’. – Mae Chan
9. Place an Offer or Participate in an Auction
Place an offer through the estate agent if the property is being sold through a private sale or treaty.
If it’s an auction, ensure you understand the auction process, set a budget, and stick to it. Winning a bid means committing to a full deposit amount and buying the property, so being prepared and confident in your maximum offer is crucial.
If you choose that route, understanding the rules and strategies for auctions is crucial. Set a strict budget, and consider employing a professional bidder if you need more clarification. When placing an offer, be informed about the recent sale prices in the area to make a competitive yet reasonable offer.
10. Finalise the Contract and Make the Deposit
After your offer is accepted or you win at an auction, it’s time to finalise the full sale contract with the seller. Review the sale contract thoroughly, ideally with the assistance of a legal professional. Once everything is in order, you’ll need to make the deposit, typically 10% of the purchase price.
Carefully review the whole contract of sale and contract, paying attention to any special conditions, deadlines, and what fixtures and fittings are included with the property. This is the time to negotiate any final terms, and having legal assistance can be invaluable in navigating this complex process.
11. Complete the Settlement and Move In
Settlement is when the ownership of the property is transferred from the seller to you. It usually takes place 4-6 weeks after the contract has been signed. Once the settlement, final inspection and open house is completed, you can collect the keys and move into your new home!
Coordinate with your solicitor and mortgage provider to finalise all paperwork for settlement day. Prepare for moving day by organising utilities and updating your address with all relevant services and institutions. Once settled into a new house, enjoy making the space your own and start planning for its future, whether that means renovations, landscaping, or just settling in.
12. Regularly Review Your Mortgage
Once you have settled into your new home, keep an eye on the interest rate on your mortgage and the market trends for home loans. Regularly reviewing your mortgage can help you take advantage of lower interest rates and better loan features or even pay off your home loan sooner than expected.
By following these steps, you will be well on your way to purchasing your dream home in Sydney or a new property in Melbourne. Remember, thorough research, careful planning, a good deal, and a clear understanding of your finances are key to a successful property purchase.
Advice from a Professional
‘I always recommend using a Top 10 mortgage broker because you need someone to manage your home loan whilst you are busy with life. Mortgage brokers are paid a trail commission which incentivises them to run regular pricing requests on your home loan with the lender in question’.
Mansour Soltani – Soren FinancialÂ
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Other helpful things to know…
Cooling Off Period
The cooling-off period is a crucial safety net for buyers. It’s a designated period after you sign the contract during the settlement period, during which the buyer has the right to withdraw from the sale.
In New South Wales, the cooling-off period is typically five business days, while in Victoria, it is three. This time allows the potential buyer to conduct additional inspections, finalise their loan approval, or reconsider their commitment without significant penalties.
If a buyer decides to pull out during the cooling-off period, they may be required to pay a small percentage of the purchase price (usually 0.25%) as a penalty. The cooling-off period can help you make a final, confident and informed decision without the pressure of immediate commitment.
Purchase Price
The purchase price of the property title is the amount agreed upon by both the buyer and seller as the cost of the property. It’s essential to understand that the purchase price of a property involves more than just matching your budget—it should reflect the actual value of the property considering its condition, location, market demand, and other real estate trends. Buyers should research similar properties and consider current market conditions to ensure the asking price is fair.
Negotiating the purchase price through an estate agent can save you thousands of dollars and ensure you invest wisely.
Real Estate Agent
A real estate agent acts as a mediator between buyers and sellers. They possess in-depth knowledge of the property market, which is invaluable during your search for the right home. Agents provide insights into the neighbourhood, upcoming developments, and comparative market analyses.
A real estate agent can help buyers identify suitable properties, arrange viewings, and negotiate the purchase price and terms with sellers. Using an agent’s expertise can streamline both the seller and buying process, provide access to off-market listings, and help navigate complex negotiations and paperwork.
Mortgage Broker
A broker is essentially a middleman between borrowers and lenders. They have expertise in understanding and comparing various mortgage products across different lenders. Using a broker can simplify finding the best mortgage deal tailored to your situation.
They will assist you in understanding different loan features, interest rates, and potential fees associated with your mortgage. Moreover, mortgage brokers often have access to better rates than what is typically advertised or offered directly to consumers due to their industry connections and volume of business.
Using a mortgage broker’s services can save time, reduce stress, and potentially secure more favourable home loans and terms. Once you have settled into your new home, keep an eye on the interest rate on your mortgage and the market trends for home loans.
Regularly reviewing your mortgage can help you take advantage of lower interest rates and better loan features or even pay off your home loan sooner than expected.
By following these steps, you will be well on your way to purchasing your dream home in Sydney or a new property in Melbourne. Remember, thorough research, careful planning, a good deal, and a clear understanding of your finances are key to a successful property purchase.
Speak to an Expert
Don’t hesitate to contact a professional who can guide you through the complexities of loan products and interest rates, ensuring that you secure the best possible deal.
Ready to take the next step? Contact a mortgage broker today to explore your options and secure your next property.
FAQs for buying property
The initial steps include:
Committing to purchasing a property.
Organising your finances.
Determining your borrowing capacity.
Planning your deposit.
It is crucial to be prepared both financially and mentally for the responsibilities that accompany homeownership.
Review your savings, check your credit score, and consult a financial adviser. Create a detailed budget and consider speaking with a mortgage broker to structure your budget and savings plan effectively.
Your income, debts, financial commitments, and employment status influence your borrowing capacity. It is advisable to contact multiple lenders or a mortgage broker for a precise figure and advice on improving your borrowing power.
Yes, first-time home buyers may qualify for various grants and concessions, such as the First Home Owner Grant or stamp duty reductions. It is essential to research and apply for any grants you are eligible for to help manage upfront costs.
Compare different mortgage products, including fixed-rate, variable-rate, and interest-only loans. Consider the pros and cons of each and select one that suits your financial situation and risk tolerance.
Mortgage pre-approval helps you understand what you can afford, enhances your property search by setting a realistic budget, and shows agents and sellers that you are a serious buyer. It can also expedite the final loan approval process.
Consider the property’s location, proximity to amenities, public transport, schools, and work. Also, research the neighbourhood, local schools, and area growth forecasts to ensure the property’s long-term value.
These inspections can identify potential issues that might not be noticeable during a casual walk-through, serve as a powerful negotiating tool, or prevent you from investing in a property with significant hidden problems.
Place an offer through the estate agent if it’s a private sale. For an auction, understand the process, set a budget, and prepare to commit to the total deposit amount if you win.
You must finalise the contract and deposit and prepare for the settlement. With legal assistance, review the sale contract thoroughly and ensure all terms are understood and agreed upon.
