2. 2 Process Preliminary loan and property research (3 months) Arrange pre-approval for a home loan (allow 1 month) Active property search and price negotiations (3 months+) Exchange of contracts (1 day) Settlement (42 days later) Move in (1 day later) Renovate? (usually starts 1 year later)
3. 3 Before you look … Talk to your bank before starting to look for a house Plan for your deposit ($30,000?) Estimate a target price of your first property ($300,000?) Preliminary talk with bank to see if they’ll lend balance Repayments < 30% of your mthly after-tax income Work out whether mortgage payments will cause stress Determine realistic dwelling type unit, townhouse, duplex, house? Determine some realistic locations close to CBD, work, transport, coast, parents, family? Most young people need to go a long way SW or NW!
4. 4 Getting the finances ready Most banks lend to 90% of property value This means you need to save at least a 10% deposit Better to aim for at least a 10% deposit On $300,000 property this is $30,000 Start saving towards this target today! Start a savings account with just $10 a month If possible, try to save a lot more … eg. $80,000 Gives you a ‘buffer’ against unexpected bad events Significantly reduces time required to repay loan
5. 5 Arrange pre-approval You do this “before” making any offers! Decide on your bank and mortgage product Apply for the maximum amount possible Provide them with all paperwork / ID / payslips required can take a few weeks to get everything together Bank will give you “pre-approval” subject to them being happy with property you buy Usually given within a week of receiving paperwork Rarely “reject” a loan after pre-approval given
6. 6 First home owner’s scheme Helps boost your deposit and reduces fees Details vary by state (below is NSW) First home for you and all other title holders Normally $7000 in NSW but see end of course outline or http://www.osr.nsw.gov.au/benefits/first_home/ Must live on property for continuous 6mths in the first year Stamp duty and mortgage duty exemption Full exemption up to $500,000 property (in NSW) Saves you $10,000 in duty on a $300,000 property
7. 7 Property searching tips … Be flexible – you can’t afford the suburb you want! Use property websites (realestate.com.au and domain.com.au) Check them out with Google satellite and street-view Research actual sale prices (homepriceguide.com.au) Rent in the area before buying Jog in the area and get to know the streets Get to know the local agents Remember that the agent is on the seller’s side Calculate fair value of property yourself (next slide) Be patient and avoid emotional attachment
8. 8 Fair price for a property? Usually about 10% less than asking price Net rental yield method Total rent for one year less expenses Divided by property price Yields have varied over time between 3% and 5% Yield on house is lower than unit due to value of land Or, weekly rent x 1,000 = property price (~5% yield) $ per square meter method Price divided by number of square meters of unit or house A more reliable measure used by bank valuers! Varies by suburb and housing type/quality
