Let’s be honest, the last 3 years have been unusual. If a pandemic and floods were not enough, then unprecedented property and rental hikes may have impacted your plans for climbing the property ladder. But don’t give up! It is still possible to start climbing the ladder just by changing your perspective.
Those first steps up the property ladder are not about buying your first property. They are about good preparation. And this is something you can start right now, no matter your circumstances.
So, let’s forget the past 3 years and get excited, because your journey starts by following these five vital steps:
1. Determine why you want to buy
This may sound like an odd statement, but people buy property for different reasons.
By now, you likely have a basic idea of your assets, and what you can afford. If you know you can’t afford a big mortgage, then your reason to buy may be to get ahead. Your budget and research may be narrowed to a smaller property or a unit which may not be your long-term or “dream” home, but which gives you equity to buy bigger and better down the track.
Or perhaps your family circumstances mean buying a bigger, long-term property now, meaning that you need more savings and a careful suburb selection process.
Alternatively, you may want to buy an investment property, so your budget may include the costs of a financial advisor, and you will need to research which suburbs present the best rental opportunities and income.
Determining why you want to buy and what that means can help you avoid feeling overwhelmed when taking the next few steps on the ladder.
2. Determine your budget… and stick to it!
Once you have worked out your why, you should start working out your how by determining your budget.
Determining your budget means looking beyond the deposit and considering the ‘other’ costs involved in purchasing a property. These costs include loan repayments, bank fees, professional fees (e.g. conveyancing, accountants), stamp duty, registration fees, inspection, and search fees, to name a few. You need to be informed about these costs and budget accordingly. That is particularly so given that these costs are often not part of your loan and may need to be paid before your purchase has been completed.
It is also wise to prepare a long-term budget by considering costs such as rates, body corporate fees (if applicable), insurance, future repair and maintenance, or rising interest rates to allow yourself to live comfortably and without financial stress in the future
3. Research the property
Knowing your why and how means your research criteria is narrowed, making the process quicker, easier, and less overwhelming. For example, if you’ve decided to start your property ownership journey by purchasing a unit, you can stop looking at houses in the country.
When researching the appropriate property to get you where you need to be right now, consider what suburbs provide the best choices for your current circumstances – be it schools, shops, universities, parks, entertainment, or public transport. Work out travel distances between school, work, and home. Other important but often forgotten considerations are whether there are or will be any developments in the area, noise concerns, or restrictions on property renovations.
Some websites to help with your research include www.microburbs.com.au and www.propertyvalue.com.au. You can also request free property reports from agents or lenders. A simple Google maps search can also provide a quick and easy visual of your ideal area. However, nothing beats physically inspecting the suburb or property. If your research includes detailed or paid searches and you are unsure how to go about those searches, let us know – we can assist!
With steps 1 to 3 now completed, you are a few steps up the ladder and nearly ready to sign on the dotted line.
4. Investigate mortgage and interest rates
The idea of meeting with big banks and finance companies can be extremely daunting. But remember, you are also interviewing the lenders, so shop around and find the best option for you.
You may choose to speak with a mortgage broker so that they can do the hard work for you and present you with the best options. You can also seek recommendations and guidance from friends, family, and other professional advisors. Being prepared will give you confidence in determining the right loan for your circumstances.
How much you can borrow will depend on your assets, credit history, income, deposit, and the requirements of the lender. Most lenders will want you to have at least a 5-10% deposit, sometimes more. A deposit of at least 20% can help you avoid Lenders Mortgage Insurance, which is an added cost to your repayments that protects the lender if you default on your loan.
When interviewing your potential lenders or mortgage broker, ask questions about the interest rates, how interest is calculated, the repayment terms, and any ‘hidden’ fees. You should also ask how the refinance process works and what the exit fees are.
Starting this process early allows you time to make a properly informed decision without the rush of meeting a finance approval deadline. It also means that when the time comes to make an offer, you can do so with confidence about your financial position and lending capacity.
You are nearly ready to sign a contract and make an offer!
5. Seek the expertise of a good conveyancer or solicitor
But wait! Before you pick up the pen and sign on the dotted line, we recommend having one of our lawyers at Vitality Law Australia review the contract on your behalf. You have come this far on your journey, and while all the other steps you have taken to get here are vital, this may be the most vital step of all. We will look at the contract with fresh eyes and with your interests in mind. We will identify any gaps and let you know if any amendments are required. This is an important step. You should not be pressured into signing a contract without first having the opportunity to have it reviewed properly.
Once the contract is signed, it is a legally binding document and there are limited, if any, rights of termination. The personal and financial costs of entering a contract which contains errors far outweigh the costs and peace of mind of having it reviewed prior to signing.
Once this step is complete, you’ve got yourself on the property ladder, and your property ownership journey begins. The team at Vitality Law Australia would love to help you on your journey. Please visit our website at www.vitalitylawaustralia.com and get in touch today.
This article is intended to be for general information only. It does not constitute legal advice, nor does it establish a relationship of client and lawyer. Specific circumstances or changes in law may vary the accuracy or applicability of the information published. We recommend seeking specific legal advice particular to your circumstances before taking any action or refraining from taking any action on any issue dealt with in this article.
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Michelle Neil is a commercial and property lawyer who specialises in the pharmacy and broader healthcare industry. She prides herself on her attention to detail and practical approach to legal issues. Michelle can be contacted via email at michelle@vitalitylawaustralia.com