Purchasing

Selling or buying a house can be a very stressful time. There are so many different things you have to do in a fairly short amount of time and many things which can go wrong, however at Get Ahead Finance we will help you through this process to ensure that things go as smoothly as possible.

Property settlement is where the seller and the buyer as well as any real estate agents or settlement agents involved meet for the final stage of selling/buying a house. At settlement the property ownership is transferred from the vendors (Seller) name into the purchasers name, legally.

By implementing some of the following ideas you can reduce stress and stay on top of the many things that will need to be organised. These handy bits of advice are tried and true and will allow your property settlement to proceed smoothly.

When Purchasing:

  1. Ensure you have already spoken to a good broker regarding your finance approval before exchange of contracts or during your five day cooling off period for the purchase of your new home (it is important to speak to your broker as early as possible to arrange this).
  2. Review your contract before exchange (preferably with your lawyer or conveyancer) to ensure that you understand what is happening in order to reduce stress.
  3. Arrange pest and building reports.
  4. Organise to pay out your existing mortgage (if you have one) and sign your new mortgage documents. If you have any questions on this, refer to your broker.
  5. Listen to your lawyer or conveyancer’s advice. It is important to receive professional advice as your property and capital is on the line! Do not hesitate to ask them any questions you have.
  6. Make sure you have allowed for your legal fees, stamp duty and any other bank fees such as mortgage insurance. (A good broker can assist you with these calculations)
  7. If you are a first home buyer you may be eligible for the First Home Owners Grant, so speak to your broker about this.
  8. Simple things such as bank or administration errors can hold up a settlement. Be prepared in the event that settlement is delayed for any reason. It is a good idea to have a place to stay for the night if you have arranged to move in on the day of settlement. Brokers should follow up at every stage of the process as the banks and lenders can make mistakes. Try to avoid delays in sending back your mortgage documents and allow 3-4 days for the lender to book in settlement once they have received your documents back.
  9. Remember that you don’t get the keys from the agent until settlement is actually finalised. Don’t simply assume that you can get early occupation of your new house. Make sure your sale and subsequent purchase are in the same time frame. This will avoid wasted money on renting for a few months.
  10. Arrange for a Certificate of Currency (home insurance) to be returned with your mortgage documents. It is also important to note the name of your new lender on the insurance policy. This can be arranged very easily by phoning your insurance company. Settlement will not occur if insurance is not in place. Get Ahead Finance can arrange for a 10% discount on your home/ home and contents insurance through Allianz. Please call or email us for a quote.

Building

There is a bit of a process involved in choosing a block of land, then deciding what type of home you want to build, and what you want in that home. This can take quite a bit of effort and sometimes even cause a little extra stress, so naturally some wonder “Is it all worth it?”.

The pros of building your own home include;

  • You get exactly what you want, from room size right down to colours (Within budget of course)
  • You save money on Stamp Duty (Stamp Duty is only payable on the price of the vacant land)
  • You have the privilege of moving into a Brand new home
  • There are currently some big incentives available for people who build (Including the $10,000 QLD build bonus, and other builder incentives)
  • The cost of significant renovation’s to an older home can far exceed the cost of building a new one
  • There is a smaller chance of finding major problems with the home such as leaky pipes or faulty wiring
  • Greater Depreciation benefits if you are an investor, so more tax savings

The cons of building your own home include;

  • You pay interest on the mortgage whilst the home is built (The mortgage size increases as construction progresses)
  • This can make your finance options a little trickier (However we can normally sort these out for you)
  • You have to wait for it to be built before you can move in
  • It can be challenging to stay within your budget (Those bright and shiny things add up very quickly!)

The above list is certainly not conclusive but can help in choosing between alternatives if you are currently considering the purchase of another home.

Saving your deposit

Particularly for First Home Buyers, saving for your deposit can be quite a daunting task. Below are some tips to help you get there sooner.

  1. Complete a Budget. Complete a budget to work out how much you can realistically save each month. This will also help you work out how long it will take you to get the required deposit.
  2. Cut back on Luxuries. Consider moving back home to cut out rent, destroying credit cards, avoiding fancy cars with big leases, taking a packed lunch to work, quitting smoking, drinking less and cutting back on other unessessary items.
  3. Talk to Relatives. Find out if your parents, or other family members might be agreeable to helping out or gifting a cash inheritance.
  4. Explore a Family Guarantee. If your parents own their own home, with little or no debt on it, you may be able to do a “Family guarantee”. Your parents will need to be comfortable with this idea, but we can help explain how it works. This option also enables you to avoid mortgage insurance, thus saving you thousands of dollars.
  5. Investigate Suburbs. Look at opportunities to buy a ‘Comparable’ house in a less expensive suburb, where infrastructure and other dynamics promise to deliver good capital growth over time.
  6. Team Up. If it does not look like you will be able to buy anytime soon on your own, consider teaming up with others so you can combine savings and potentially remove the need for mortgage insurance. It may also allow you to buy in a nicer suburb, and you will both have lower individual mortgage repayments.
  7. Government Assistance. Assess whether setting up a First Home Saver’s account, where the federal government puts in a 17% contribution on amounts deposited (Up to $5500 annually). There are strings attached and the 4 years time frame may not suit everyone, but it’s worth considering.
  8. Get part of your pay put directly into savings. If you put some of it away into a high interest bearing account, where it can’t be accessed easily this can be a great way to enhance your savings.
  9. …..Add a safety net. If your employer puts part of your pay directly into savings (as per point 8 above) perhaps you could have a special account that requires a counter-signature of a parent to access it.
  10. Take on another job. If getting enough savings is the only way into a property, consider taking a second job until you’ve saved the amount of deposit required.

Credit Scoring and your Mortgage Application

In March 2014, new, more comprehensive credit reporting rules came into play affecting the ‘Credit Score’ of many Australians. But what exactly is a ‘Credit Score’, how is it calculated and do you need one if you want to take out a mortgage?

What is a ‘Credit Score’?
Your Credit Score is a determination of your eligibility to borrow money from a bank or lending institution. The assessment of your Credit Score is usually performed by a credit agency when you are looking to arrange credit – whether it be a personal loan, credit card or mortgage.

These credit agencies may complete a credit report that uses your past repayment history on various forms of credit to determine your Credit Score or Credit Rating. Lenders then use this report to assess risk when they are considering your loan application.

What is included in my Credit Report?
Understanding your Credit Report and what it contains, can help you to make more informed decisions regarding your finances and applying for credit.

A Credit Report will include personal information about you such as your full name, date of birth, driver’s license number, gender and residential address, plus important employer information. It will also include details about your credit history – and this is a major factor in determining your Credit Score.

The report will cover off your financial behaviour, including any credit applications that you may have made already, major payment defaults on loans, and other factors like bankruptcy. The report will also feature your repayment history and minor credit infringements on your bills – like rent, telecommunications accounts, energy and water bills, credit card payments and so on.

The information the reporting agency can access about you will also include the amount of credit accounts you have open, the date the accounts were opened and closed and your repayment performance on each account as far back as December 2012.

Does this affect your chances of getting a mortgage?
Lenders use your Credit Score or Credit Rating as an important tool in their decision making process when it comes to approving loans – whether they are personal loans, mortgages, credit cards or asset financing. In some circumstances, a very poor Credit Score could make you appear a high risk to lenders and sometimes this may mean that your application is rejected.

However, it could also mean that you are eligible for a loan with a slightly higher interest rate. We’re here to help you obtain the very best interest rate available to you considering your personal situation and financial circumstances, and with our professional approach, difficulties such as these can often be overcome.

What if you have ‘No Credit Score’ or a ‘Low Credit Score’?
People who have only recently migrated to Australia may not have a Credit Score because they have not yet had time to establish a credit or repayment history. Other people who often have difficulty with a Low Credit Score are young people just starting off. If you find yourself in one of these groups, then consider asking a parent or family friend to be the ‘guarantor’ on a loan for you.

If you have a Low Credit Score, you can raise your score over time with the right behaviour. Always pay your bills on time or before the due date.  (You can organise to pay bills by automatic payment to make sure you’re never late.) Other things you can do to improve your Credit Score include:

  • Paying down existing debts
  • Keep unused bank accounts open
  • Open several types of credit lines and make sure you don’t default on payments.

How do I know what’s on my Credit Report?
If you want to make sure you have a good Credit Score on your Credit Report, it pays to monitor your official Credit Report regularly. You can receive a copy for free once every 12 months, from Australia’s major reporting agencies – we suggest you ask a reputable company like Veda  or Dun & Bradstreet.

You can help to avoid trouble with future credit applications by making sure that your Credit Report is accurate and by addressing any negative information in the ways we’ve outlined above before you apply. It is also important that you check your Credit Report for any fraudulent entries before you submit any credit applications. If there are any inaccuracies in your history, you can apply to have these removed.

Overall, accurate credit reporting is good for Australian consumers, so you shouldn’t be nervous about your Credit Report. If you keep up to date with your bills and payments, your Credit Report will work in your favour.

Remember, we’re here to help you get the best deal on your mortgage and other financing requirements, so if you need more information about your Credit Report or Credit Score, don’t hesitate to give us a call.