Buying a property isn’t always a straightforward process, and one area that can cause confusion is
the question of who is responsible for insuring it between the signing of the contract and
settlement. There are differences in regulations between states, but the basics are as follows.
When it comes to property insurance, there can be some grey areas, but it’s important to
understand your general obligations. Additionally, if both parties are insured throughout the entire
process, it saves the headache should anything go wrong.
As the vendor, if there’s substantial damage to the property but the purchaser still wants to go
ahead with the sale, you may need to consider a negotiation on price, or you may need to fix the
damage before settlement. If you’re still insured, your insurance policy will cover the work needed.
For purchasers, if there’s substantial damage, you have the option to negotiate a price reduction
or alternatively get out of the contract.
Importantly, it’s the vendor’s obligation to leave the property in the same condition it was in when
contracts were signed, regardless of who holds risk over the property.
This is a complex area that can be hard to navigate without support, so it’s a good idea to talk to
your mortgage broker to gain a clearer understanding of how best to proceed and protect yourself.
For detailed advice about property insurance in your State, contact an experienced property
Purchasing a property with a loved one can be a great way to enter to the property market, but
taking on such a large financial responsibility with someone else does come with risks. These are
some of the pros and cons to consider before you both sign your names on the contract.
PRO: Entering the property market earlier – or at all
Rising house prices, the need to save for a deposit and the risk of fluctuating interest rates can all
make getting your foot in the home-ownership door very difficult. It may seem an impossible task at
times, and it can take years before you’re in a serious position to purchase. Buying property with a
friend or family member means the dream of home ownership can be realised much sooner.
PRO: Buying where you want versus where you can afford
Sharing loan repayments with another person can be easier in terms of servicing the loan and may
allow you to borrow more. It might mean the difference between buying that inner-city place you’ve
always wanted and settling for a suburb you’ve never heard of. By pooling purchasing power you
can find your ideal home, which otherwise might have been beyond your budget.
You’re walking down the street when you see it – the perfect house. It’s charming, quaint and, okay, maybe a bit small, but you’re sure you could extend it later. But before you sign on the dotted line, consider whether your dreams will hold up under a little scrutiny.
Every state has disclosure laws that require the vendor to tell you some of the potential pitfalls of the property. These laws aren’t comprehensive so consider the following when you’re inspecting your dream house.
1. Building inspectionNo matter what the agent has told you, or how new the property is, a building inspection is a must. A building inspection report is sometimes referred to as a pre-purchase property inspection report. An inspector will check for structural damage, damp issues, compliance problems and anything else that might prove to be a headache down the track. While building inspectors should also identify damage caused by termites, a building inspection is separate to a pest inspection. Always use a qualified building inspector, such as a licensed builder or surveyor. Ask any potential inspectors what their qualifications are and whether they carry insurance. Also ask what the report will include – is it a standard report, or a more-expensive comprehensive report? There are Australian standards for building inspection reports, and a professional must ensure that their report meets these standards
2. Your wish listBefore visiting a property, think about the practical things that you want in a home. For example, how many bedrooms do you need? Do you want an outdoor space such as a balcony or garden? Does it need to be near public transport? Do you want a large entertainer’s kitchen or a separate bathroom for the kids? You probably won’t get everything on your wish list in one house, so split the list into ‘musthaves’ and ‘nice-to-haves’. Some things can be added later, but there’s no point buying a house that’s missing a much-needed bedroom because you fell in love with a cosy reading nook.
The amount you can borrow and the amount you should borrow are sometimes two very different
things. Before you apply for a home loan, it makes sense to realistically assess your financial
situation. Here’s how to do it.
Understand your borrowing capacity
Generally speaking, your borrowing capacity – what you can borrow – depends on a number of
factors, including: your income, your monthly expenses, your existing debts, how much deposit you have saved, current interest rate, type of loan whether it’s a principal, or principal and interest loan
the term of the loan, estimated repayments.
However, knowing the difference between what you can borrow and what you should borrow is
very important. As a general rule, it’s not a good idea to allocate more than 30% of your monthly
household income to repaying your home loan.
Build a budget
To fully understand what your realistic borrowing limit might be, first of all create a budget – and
stick to it. Once you understand exactly what’s coming in and going out you can properly assess
how much you can afford to repay – and therefore what you should borrow.
If you don’t feel comfortable drawing up the budget yourself, it’s wise to seek help. A financial
planner can assist you in preparing a budget.
Expenses to include in your budget include, but are not limited to:
You’ve been dreaming of that new kitchen and dining room for as long as you can remember, and now the time has come to put your plans in motion. But do you really have the budget to afford the works? Here are a few things to think about before making the leap from Pinterest board to blueprints.
Work out your budget
before you look at borrowing any money, you first need to work out how much your renovation will cost. Get Ask An Architect to send you their comprehensive guide to costing a renovation.
Before your finalise your plans, you can arrange for a building inspector to help identify any
structural work that might be needed. Major work could significantly increase your budget, so it may be worthwhile to talk directly to a professional to get a more tailored understanding of how much you’re up for. Architects and master builders are usually happy to provide a quote, so think about getting more than one quote to give you an idea of the range.
In addition, add a percentage for contingencies: most experts recommend that you add another 10% to 20% to the overall budget to cover the inevitable delays and complications that arise throughout the renovation process.
Once you know what the costs may be, you can start to think about how to raise the cash. Of
course, in an ideal world you’ll have saved up at least part of the amount beforehand, but
renovations can run into the tens or even hundreds of thousands, so most people will need to
borrow some money.
Unlock your equity
If you’ve been in your home for a while, chances are that you have considerable equity, both as a result of paying off your initial home loan and from rising property values. Equity is the amount of your home that you own; that is, the value of your property, less the outstanding loan amount. For example, if your property is valued at $500,000 and you owe $300,000 on your loan, your equity is $200,000 ($500,000 - $300,000 = $200,000).
As long as you can meet the repayments and the renovations are likely to add value to your
property, most lenders should be willing to lend you a percentage of your equity for home
renovations. Depending on your situation, this equity could be accessed through redrawing,
increasing your existing loan or refinancing your loan entirely. A mortgage broker will be able to advise on the best option for you.
The home loan market is constantly changing, with new and attractive deals coming up all the time.
Refinancing can help you secure a more competitive interest rate, access the equity in your home,
add features (such as an offset account) or consolidate your debts, but there are some important
questions to consider before you get the ball rolling.
1. Has my financial situation changed since I first applied for a home loan?
A refinance is effectively a brand new loan application. All of the personal financial data you had to
gather the first time around will need to be produced again. The stability of your income stream,
your assets, and your credit card debts and other debts and expenses will all be reviewed, and
may impact the result of your application.
It’s important to think about your ongoing ability to pay off your loan, particularly if you’re planning
on making big changes that will affect your financial situation, such as starting a family or quitting
your job to start your own business.
Of course, if you’ve just received a big pay rise or are now an empty-nester, this may also make a
difference to your loan application.
2. Will the refinance really save me money?
Negotiating a lower interest rate or consolidating debts may seem like a financial no-brainer, but
the fees associated with switching loans can be hefty, so you need to look at all the costs to work
out whether you will really be saving money.
Fixed rate loans can be particularly expensive to exit, and leaving your home loan early will usually
see you pay some combination of exit fees, application fees, stamp duty or even legal fees. If
you’re borrowing more than 80% of the value of your property, lenders mortgage insurance (LMI)
may also be required.
Unfortunately, these fees and costs are not usually transferable from one loan to another, so you
may need to pay them again even if you paid them when you took out your original loan.
As parents, we want the best for our children, particularly when they’re making a major purchase. When it comes to buying their first home, knowing what government assistance is available can make all the difference. Read on to learn about the First Home Owner Grant (FHOG) in each state and territory.
Watching your children buy their first home can be exciting – and overwhelming. You see them working hard to save that all-important deposit, looking at properties, and counting down the days until they can move into their own place.
However, your kids’ ‘great Australian dream’ could actually happen sooner than you (and they) think. Thanks to government efforts to accelerate home ownership and boost the home building industry, first home buyers are now eligible for grants and subsidies.
Each state and territory provides some sort of financial assistance to first home buyers. Here’s a basic overview of what’s on offer at the moment. Please keep in mind that this information can change.
New South WalesIn NSW, first home buyers are entitled to a one-off range of grants, exemptions and concessions when buying or building a new home.
The First Home Owner Grant (New Homes) scheme provides $10,000 to eligible first home buyers to help buy or build a new home. The value of the new home purchased must not be greater than $750,000. At least one of the home owners will need to live in the property for a continuous period of at least 6 months.
Through the First Home - New Home scheme, first home buyers are exempt from stamp duty (also known as transfer duty) on new homes up to $550,000, and on vacant land up to $350,000. They will receive stamp duty concessions on new homes valued between $550,000 and $650,000, and on vacant land valued between $350,000 and $450,000.
The rise of new apartment developments in our cities provides greater opportunities for potential home owners to buy off the plan. There are benefits to this, but also a number of things to be mindful of. We look at some of the things to consider when buying off the plan.
A major benefit of purchasing off the plan is that you’ll own a brand new property. There are also financial benefits. For example, you’ll have the security of knowing how much you’ll pay for the property in the future, even if its value increases. Construction usually takes a year or two, so there’s time to save before you settle.
If you need to borrow money for the deposit, speak to your broker about how to best structure the purchase. Most home loan lenders won't approve a loan for a long settlement period, but a broker can provide advice about what assurances you can get regarding the amount you may be able to borrow when it comes time to settle.
Depending on which state or territory you’re in, you may have access to stamp duty and tax concessions, or government grants. If you’re purchasing the property as an investment you may also be eligible for tax benefits. You should consult with your accountant for personal financial advice specific to your circumstances.
The year started with some turbulent economic activity in the local and international spheres, including a falling Australian dollar, local share market falls and the slowing of the Chinese economy. We run through the economic situation of early 2016.
The first 16 trading days of the year until 26 January saw the All Ordinaries Index fall by 5.4%, concerning both investors and consumers. This reflects some of the issues in the commodities market, where export prices for iron ore, coal, wheat and oil have continued to slump. Commodities account for over 50% of the country’s foreign earnings, compounding the impact on the share market and our foreign balance of trade.
On the positive side, consumers are enjoying lower petrol costs, but for those who rely on their superannuation this year looks less rosy. The drop in the share market will contribute to declining growth rates in superannuation funds, a trend that has been ongoing for the past three years, and one that is likely to be seen for the remainder of the year.
Exports will find some relief in the lower Australian dollar, which has devalued against the US dollar by over 2.8% during the month of January. This is also good news for education and tourism, as more foreign students and visitors flock to Australia. Those planning overseas travel will feel an extra pinch in their hip pocket.
If you are leaving your employer due to redundancy, you have a great opportunity to make a fresh start.
Now could be the best time for you to think about a career change, become self-employed or consider retiring if you are close to retirement.
But regardless of what your next steps might be, it's important that you:
- understand the payments you may receive from your employer and what tax treatments apply
- consider the financial issues likely to be relevant to your age and career goals, and
- speak to a financial adviser to find out how you could manage your redundancy payments effectively.