We can provide you with step-by-step guidance throughout the purchasing process.

Do I have enough for a deposit?

A typical home purchase is made with your own cash (i.e. the deposit), plus the amount borrowed through your home loan facility. Lenders offer loans based on loan-to-value ratios (LVR).

For example, if you have a property value of $500,000 and have a deposit of $100,000, your loan amount would be $400,000. This gives you an LVR of $400,000 / $500,000, or 80%.

One complication to LVR is that the property value used for this calculation is different from the purchase price. The lender will purchase a valuation report from a third party property valuer and use this amount for the calculation. Consequently, if the valuation expert assesses the property to have less value than the purchase price, there may be a shortfall in funding.

Continuing with the above example, if the property was valued by the independent expert at $500,000 but the purchase price was $550,000, there would be a shortfall of $50,000, for which additional funding must be obtained in order to complete the purchase.

As a result of lending restrictions, a deposit of 20% of the property value is generally recommended. However, low deposit and no deposit home loans are other possible options, if you have only saved 10% (or even 5%) of a given property value. If you do decide to borrow more than 80% of the property value, you will need to pay lenders mortgage insurance (LMI).

What government assistance is available?

    • First Home Owner Grant (FHOG): This is a one-off grant payable to eligible first home owners. Eligibility requirements vary by state. For NSW, the grant represents $10,000 for new homes. For more information, visit the government website at: http://www.firsthome.gov.au/.
    • First Home Loan Deposit Scheme (FHLDS): This government scheme enables first home buyers to purchase a home with a deposit as low as 5% without paying for LMI. Commencing on 1 January 2020, the FHLDS supports up to 10,000 applicants each financial year. Applications to participate in the FHLDS are processed through one of 27 participating lenders.

Contact us or visit the government website directly (https://www.nhfic.gov.au/what-we-do/fhlds/how-to-apply/) to find out which lenders are participating in the scheme.

    • NSW First Home Buyers Assistance Scheme (FHBAS): Eligible first home buyers in NSW may seek full or partial stamp duty exemptions. If your property is valued at less than $650,000, you can apply for full stamp duty exemption, while property values ranging from $650,000 to $800,000 qualify for partial exemption. FHBAS applications are made after contracts are exchanged with the property vendor.

Refer to the NSW government website at: https://www.revenue.nsw.gov.au/grants-schemes/first-home-buyer/assistance-scheme,

What costs other than the deposit and LMI do I need to budget for?

There are a variety of costs that will be incurred as part of the property purchase. We generally recommend that you budget an additional 5% of the purchase price, excluding Lenders Mortgage Insurance (LMI). For example, if you wish to purchase a property valued at $700,000, we recommend that you budget for costs of $35,000, in addition to your deposit and LMI.

These additional costs include:

    • Government fees such as stamp duty, transfer fees and council rate adjustments
    • Conveyancing and legal costs
    • Title search and mortgage registration fees
    • Building and pest inspection reports
    • Home, building and contents insurance
    • Moving costs
    • Connection costs of utilities

How much can I borrow? 

The amount you can borrow (commonly referred to as your “borrowing capacity”) depends on a range of factors:

    • Number of borrowers – Including more than one person on your mortgage may make strategic sense if you wish to boost your borrowing capacity. It means that you can include the income of each borrower, and the additional borrowers may have a better credit score, which can strengthen your application.

On the other hand, lodging a loan application on your own may be preferred if the other borrower has a higher level of debt or expenditure, or if the relationship between the borrowers may give rise to additional complexity (e.g. if the relationship ends).

    • Dependants affect your capacity to make repayments as they, accurately or not, are assumed by the lender to increase your monthly living expenses (and therefore reduce your disposable income). As such, the more dependants you have, the less you can borrow.
    • Marital status – Having a de facto partner or a spouse can provide you with options in structuring your loan. An easy way to boost your borrowing capacity is to include your partner’s income on your loan application.
    • Income streams and their nature are assessed differently by lenders.

For example, permanent and full-time employment is regarded as more stable by lenders compared to casual work. This means that if you are applying for a loan using income as a casual employee, most lenders would require you to demonstrate 6 months of continuous work.

Furthermore, income from commissions and bonuses may be discounted by the lender, as these are perceived to be contingent (e.g. dependent on you meeting certain targets or key performance indicators).

Different income sources may also require alternative documentation, such as two full financial years of tax returns if you are self-employed.

    • Expenses – Your living expenses affect the lender’s assessment of your ability to make monthly repayments as they fall due.

Lenders often use the Household Expenditure Measure (HEM) to help benchmark applicants’ living expenses. As part of the loan application process, the lender will review your bank and credit card statements to assess your typical living expenses. In simplistic terms, the bank will take the higher of your expenses and the benchmarked expenses.

For illustrative purposes, if the lender’s benchmark suggests that, given your situation, median living expenses are $2,000 a month, and your monthly expenses are $3,000 a month, the lender will use the $3,000 in determining your borrowing capacity. On the other hand, if you live a frugal lifestyle and only spend $1,500 a month, the lender will, nevertheless, adopt the $2,000 expenditure in order to satisfy responsible lending requirements.

    • Existing debt includes existing mortgages, student debt, personal and car loans and credit card limits. Existing debt reduces the amount that you can borrow. As such, ahead of making your loan application, we often recommend that you minimise the number of credit cards you have and repay personal loans (to the extent that it does not negatively impact on your deposit).

A common question we receive is whether the credit card limit is factored in if the credit card balance is repaid in full each month. Regardless of how much of the credit card limit is used, and regardless of whether the balance is repaid in full each month, the full credit card limit is applied against your borrowing capacity.

    • Whether you are a first home buyer – You may be eligible for government assistance.
    • Whether the property is new or existing and intended to be owner occupied or investment can affect the interest rate quoted by the lender. Different suburbs also attract different minimum loan-to-value ratios (LVRs).

Assessment criteria change continually. For a free, confidential and up-to-date assessment, speak to us now.

Choosing a home loan 

There are a number of different home loan products available from our panel of over 25 lenders. Reach out to us for assistance in choosing a lender that best matches your situation. For an overview of the typical products available, refer to the list of Loan Types.

When do I apply for a home loan? 

We generally recommend that you seek a conditional pre-approval to ensure your finance is sorted before you start looking for a property to purchase. A pre-approval tells you how much a lender will permit you to borrow and lasts for up to 3 months. It involves an application and other paperwork to verify identify and your financial circumstances.

Whilst a pre-approval is not a full (unconditional) approval and a separate application is required to seek an actual mortgage, having a pre-approval increases your bargaining power when negotiating purchase prices and settlement dates with vendors.

Speak to us to kick off your property journey on the right foot.

How do I find a property? 

Buying a property is a major milestone and requires you to balance a number of competing priorities. It is important to reflect on what you consider to be of highest priority in setting your budget and the desired location and property type.

Typical considerations include:

    • Your budget, given the amount of deposit saved, borrowing capacity and interest rate range that you are comfortable repaying on a monthly basis
    • Suburbs that you would like to buy in and whether this is realistic given your budget
    • Lifestyle, such as proximity to your workplace, schools, shops and other amenities. This may also affect whether you choose to purchase an apartment or a house. For example, young families may prefer to purchase a house with a backyard, or an apartment close to a large playground.

Once you have decided on a budget, property type and suburb, you can use a range of resources to select potential properties. Explore online resources such as Realestate.com.au and Domain.com.au, or reach out to your local real estate agent or a buyers agent.

Purchasing via an Auction versus a Private Sale

    • An auction is conducted by a licensed real estate agent (the auctioneer) and involves potential buyers bidding against each other in a public setting. The highest bidder at the fall of the hammer is legally bound to enter into the purchase contract, provided the bid price exceeds the vendor’s reserve (being the minimum price that would be accepted by the vendor).

In order to bid at auction, you are required to register with the vendor’s agent. If you are the highest bidder, you must sign the contract of sale and pay the deposit immediately. There is no cooling-off period and contracts are exchanged on the day of the auction.

Due to the presence of competing bidders, auctions are emotional situations that create a sense of urgency. You may be tempted to offer higher bids than you would ordinarily be willing to pay. If you are interested in purchasing a property that is listed for auction but would prefer not to attend the auction, all is not lost. The vendor may be open to receiving pre-auction offers, which are conducted in a similar manner to a private sale, as discussed below.

    • A private sale occurs when a property is listed for sale through an agent with a specific asking price. Offers can be made verbally to the agent, but are then usually requested to be formally made in writing (commonly through email).

Regardless of the method of purchase, there are a few steps that you should take before making an offer or attending an auction:

    • Line up a pre-approval
    • Obtain a copy of the sale contract and ask your solicitor to review it
    • Organise a building and pest inspection, if the vendor has not already organised this
    • Obtain a strata report, if the property is an apartment/unit

 For tips in formulating your bargaining strategy, click here.

Making an offer – Common bargaining tactics

Even if you intend to pursue a property that has been listed for auction, it is useful to formulate a bargaining strategy. Bargaining skills may come in handy when making a pre-auction offer, or if the property is passed in at auction and post-auction negotiations kick in.

    • Decide on a fair price: Negotiating a fair price to both vendor and the potential purchaser is a sensitive artform. It is important not to allow yourself to become too excited about a property and commit yourself to a higher price than any other rational person would value the property to be (fair market value).

In order to assess fair market value, you need to research the area and property types you are interested in to understand the typical price ranges that vendors would be asking for (and that other buyers are willing to pay for).

Use comparable properties currently listed in the area, recent comparable sales, and even an independent valuation expert’s report to understand what a property’s market value might be. Factors that are used to compare properties for similarity include location and proximity to amenities (e.g. schools, shops and other services), land size, property condition, property age, number of rooms and property type.

When putting forward your first offer, consider adopting an amount that is less than your best offer. Remember, this offer will be used as a starting point, and the vendor will likely attempt to negotiate a higher price. Until contracts are exchanged (which, even then, are subject to the statutory cooling off period), these offers are not legally enforceable.

On the other hand, the offer that you put forward should be fair. Submitting a price that is far lower than market value (or a “lowball offer”) will generally be received poorly by the vendor, and should only be considered in specific situations, where the vendor has limited bargaining power.

    • Understand why the property is being sold: Not every negotiation hinges on price. Vendors have different motivations for selling the property. These can include up-sizing, down-sizing, mortgage stress and deceased estates. “The vendor” may comprise multiple individuals, which can result in lengthy negotiations. Adapt your strategy based on your understanding of the vendor.
    • Show that you are a serious buyer: Whilst real estate agents earn their living by representing the vendor, you want to be on their radar. Getting them on your side can mean that they will be in touch with updates on the property, will inform you when they have received competing offers (which benefits them by creating competition and hurrying you along the process), and could communicate your offer more favourably to the vendor.

By acting in the vendor’s interest, the agent will filter out nosy neighbours and hesitant browsers, zeroing in on those who appear to be ready and able to make a purchase.

If you would like to pursue a property purchase, show the real estate agent that you are serious by following the five steps below:

      1. Get a pre-approval to show your finances are in order and ensure you have budgeted for a sufficient deposit.
      2. Visit the property early on in the campaign. Not only does it show your interest, but it also gives you time to perform pre-sale inspections, especially if the property will be going to auction.
      3. Request to see building and pest inspection reports and strata reports (for apartment units).
      4. Ask if any offers have been received and start negotiations early. Doing this also helps you to assess the level of competition out there.
      5. Be confident and decisive. Have clear criteria for your desired property and check these off against the property you want to bid for. Be aware of and be prepared to use negative aspects of the property (e.g. termites) in price negotiations, if the situation arises.
  • Being flexible on settlement date can be used as a bargaining chip: Some vendors need cash quickly and are keen to sell as soon as possible. Other vendors need time to find a new house to move into. Being flexible on these timelines can improve your bargaining position and can encourage a vendor to take your offer over a higher competing bid.

Having a good mortgage broker on your side and a pre-approval sorted can make the difference between 3 weeks or 5 days. Get in touch to have a trusted mortgage adviser on your side.

Should I get a house or a unit? 

Whether you decide on a house or an apartment depends on your personal circumstances, including family status, finances and lifestyle.

Circumstances to consider when purchasing a house include:

    • Being roomier – Houses tend to provide you with more internal and external private space. Families with young children are particularly attracted to properties that offer external space for them to run around in. Other people prefer to be further away from neighbours, or simply wish for additional external space for entertaining guests or gardening. This additional space also gives you the flexibility to transition across multiple life stages.
    • Land ownership – Buying a house means you buy the land underneath it. This gives you freedom (subject to council restrictions) to rebuild or renovate.
    • Price – Due to the reasons described above, houses tend to be more expensive than apartments in the same area. It is important to set your budget to understand which suburbs are affordable to you.
    • Resale value and rental yield – Houses have a tendency to generate stronger capital gains (i.e. asset appreciation) than units. On the other hand, if you intend to rent the property out to tenants, an apartment may generate a higher return on investment for you.
    • Maintenance – Outdoor space and gardens associated with houses can involve upkeep and maintenance costs. If you do not want to be responsible for weeding and mowing the lawn, a house with an outdoor area may not be for you.
    • Living and furniture costs – Having a greater living space means that you need more furniture to fit it out. Living costs also tend to be higher, as people tend to spend more on utilities (electricity and water) to warm up and cool down living areas.

Circumstances to consider when purchasing an apartment unit include:

    • Proximity to amenities – Apartment developers tend to choose sites that are close to services (train stations or bus stops, medical facilities, schools) and shops.
    • Facilities – Apartment buildings, particularly newer developments, often include additional facilities that may boost your lifestyle, such as a gym, a pool, shared barbecue facilities and outdoor terraces or tennis courts.
    • Price – Apartments tend to be cheaper than houses in the same suburb. If you have your heart set on a particular suburb or area and cannot afford a house, an apartment can be an affordable alternative.
    • Strata fees – Multi-dwelling properties incur strata fees, which are pooled together for the benefit of inhabitants (together, referred to as the body corporate). Strata fees are used to fund shared facilities, building insurance, as well as future maintenance and repair costs (e.g. repairing the lifts, repainting corridors). Strata by-laws may also restrict certain actions (e.g. allowing pets, smoking on common property).

If the lifestyles of both houses and apartments appeal to you, other property types that you can consider are townhouses and duplexes.

Pre-sale inspections

There are a number of pre-sale property inspections to check through prior to deciding upon a purchase. These include:

    • Personal inspections – Property viewings are either open to the public during specific times or can be arranged by appointment. Things to look for during an inspection include checking for evidence of mould or water leakage, sagging ceilings, cracks in walls, doors that can’t be opened and closed, and faulty plumbing.

This is also the time to ask the real estate agent questions about the property and to understand the vendor’s reasons for making the sale. You may also want to visit the neighbourhood at different times of the week to assess how quiet the surroundings are.

    • Building and pest inspections – Following on from your personal inspection, it is often helpful to source a third party professional to inspect the building and look out for signs of pests (in particular, signs of dreaded termites). These reports can identify problems with the property that you would not have otherwise thought to look for, or raise red flags that may require significant renovation costs to rectify.
    • Surveyor’s reports – These tell you the boundaries of the property and the size of the lot that you are looking to purchase. Having this report can give you confidence that the property that is being marketed to you is being accurately portrayed. It also lessens the likelihood of arguments with neighbours over boundaries.
    • Pre-settlement inspection – This is a final inspection arranged within a few days leading up to the settlement date. During this inspection, you would be ensuring that the property is in the same condition that it was in when contracts were exchanged. If there were any conditions to entering into the contract, this would be the time to ensure that the vendor has complied with them (e.g. steam cleaning of the carpet, gas and water are switched on).

Any potential issues with the property may give the purchaser the right to delay settlement until the issues are rectified, depending on the extent of the complaint and whether it can be supported with evidence.

    • Strata reports – These reports provide information on the building of the unit that you are looking to potentially purchase. Useful information includes strata levies, insurance, budgets, historical expenses, by-laws and disputes.
    • Swimming pools should be checked for adequate fencing and compliance with swimming pool laws.

Other searches that you may wish to conduct include title, registered plan, land tax, bankruptcy, contaminated land, council development, local authority and town planning searches. Some of these may be included as part of your solicitor’s fee.

My offer was accepted – What happens now?

Acceptance of your offer is not sufficient to lock yourself and the vendor into the property sale. After you have received a verbal acceptance, the following events occur, usually in fairly quick succession:

  1. Your solicitor or conveyancer should have reviewed the contract beforehand, leaving you free to arrange a time to exchange contracts, often via your solicitor or the real estate agent.
  2. Concurrently with the exchange of contracts, you will be asked to pay the deposit. This will generally be 10% of the purchase price.
  3. A cooling-off period of 5 to 10 business days may apply, during which either the purchaser or the vendor is free to withdraw from the transaction. Withdrawal from the purchase as the buyer will result in the forfeiture of a portion of the purchase price (0.25% in NSW). Once the cooling-off period has lapsed, significant financial penalties will apply.

There are circumstances where a cooling-off period will not apply to your purchase:

    • If the property sale was conducted via an auction, there will be no cooling-off period.
    • If the sale is being conducted via private treaty, you can choose to waive the cooling-off period by submitting a form to the vendor referred to as a “66W certificate”.
  1. A pre-settlement inspection should be performed a few days prior to the date of settlement. This is a final inspection to ensure that the property is in the same condition as when contracts were exchanged.
  2. Settlement occurs roughly 6 weeks after exchange of contracts but can be varied upon agreement of both the vendor and the purchaser. On settlement date, you must pay the remainder of the purchase price, upon which ownership of the property transfers to you.