So, you’ve found your dream home or perhaps you’ve decided to enter the property investment market. What are the next steps in making that dream become a reality?
Step 1. Determine your budget
The first step towards home ownership involves a little self-examination. You will need to assess your finances and determine how much you can afford to repay.
To help assist you, PropCalc, is a handy application which provides you with the real cost of owning a property, based on specific information about any property in question.
Step 2. How much can you borrow?
Now that you have a better idea of the total amount you can devote to your future mortgage repayments, you should now be able to determine how much you can borrow. This amount will vary from lender to lender and many banks do offer online calculators that allow you to determine your borrowing limit.
Having found the best possible deal, it’s time to apply for a home loan, attend a loan interview and get approval. Make sure you have all the necessary documents ready for your lender or broker.
Procedures do vary from lender to lender, but it is likely you will be issued with either a ‘home loan guarantee certificate’ or a ‘pre-approval certificate’. This means that your home loan has been or will be approved when you find the property you want to purchase (subject to a few conditions). One of the main conditions is often a valuation of the property to ensure a buyer isn’t paying too much for a property.
Loan approvals don’t last forever. They typically are valid for around six months, but sometimes up to twelve months.
Step 3. Exchanging contracts
The next step after you’ve finally found the right property following all your research and weekends viewing properties will be signing the contract of sale.
Neither you or the seller is legally obligated to go ahead with the sale until a written, signed contract is exchanged. The contract usually details:
- Property address
- Names of the parties involved (you and the seller)
- Selling price
- Terms and conditions
- Special inclusions in the sale
- Date of settlement
Exchanging contracts is what it sounds like. Both you and the seller sign a copy of the contract then swap them so they are both signed. You also have to pay the deposit at this time.
Step 4. Get legal representation
While the contract is usually prepared by the seller’s Solicitor, your Solicitor or Conveyancer should check that everything is in order before you exchange contracts including:
- Zoning, heritage or title restrictions don’t clash with your intended use of the property
- That all property rates and taxes are up to date
- Help arrange for building and pest inspections
Step 5. The cooling off period
If you have bought through private treaty rather than at auction, that is you’ve made an offer to the seller and it’s been accepted, you may enter a cooling-off period after the contract is exchanged. During this period you can cancel the contract but there may be a penalty. This is normally 0.25 per cent of the purchase price.
Step 6. The period between exchange and settlement
The time between exchange and settlement is genuinely about six weeks, although this can change if both you and the seller agree to extend or reduce it. This is the time when you should:
- Arrange the balance of the purchase price. That is, finalise the finance and sign the mortgage documents
- Insure the property. You don’t want something to happen to the property during the settlement period and find out too late that it’s your responsibility to pay for. BMT Insurance works with some of Australia’s most experienced providers to help you select suitable and cost effective home insurance for your new home
At the same time, your lender will:
- Arrange for a valuation of the property
Step 7. Settlement at last
Settlement of the property is when the rest of the purchase price is paid and the keys are yours. You may also need to pay stamp duty at settlement.
Congratulations. You are now the proud owner of your new home or investment property and you are officially in the ‘property market’.
Step 8. If you have purchased an investment property, organise a depreciation schedule
A depreciation schedule prepared by BMT Tax Depreciation helps to maximise the cash return from your investment property each financial year. To ensure that you claim the maximum depreciation deductions, a BMT Tax Depreciation Schedule will last for the life of the property or for forty years, as specified by the Australian Taxation Office.
BMT also provide a free, easy to use tax depreciation calculator, which can assist you with an estimate of available deductions for any property.
Alternatively, you can contact one of our expert staff on 1300 728 726 for a free estimate of available deductions.