This past September I embarked on an adventure of a lifetime: perpetual debt! You laugh but 30 years is a hella long time to be owing money, is it not? And this is AFTER you’ve managed to save up the requisite 20-30% deposit (possibly even higher for apartments in some markets because banks are currently wary of a property bubble with apartments), which was near impossible in my case if it weren’t for my generous parents and uncle.
The house hunting was the easy part. Organising the loan and going through the purchasing process were not.
In no particular order, this is what I had learnt:
- Getting a pre-approval from your lender of choice to get an idea of how much you can borrow is essential, but it is really just a rough guide and has no bearing on what the bank will actually lend you. The hard part comes when you want to actually apply for the loan. This is when you need to bare your financial soul to the bank: your savings, your credit card debts, your living expenses, your existing financial obligations. EVERYTHING. You will feel your privacy being thoroughly violated.
I thought that going through the bank where most of my money is parked would make the process easier. I was wrong. My advice: use a mortgage broker.
- When buying an apartment, factor in at least a quarter of the annual body corporate fees and associated council rates and water charges plus the transfer of land title. And also the cost of a conveyancing agent. All of which added to close to $8000 for me. This is money that you need to have aside from the deposit, on the day of the settlement.
- There are no stupid questions when it comes to this large amount of money. Ask them at every opportunity and don’t be afraid to harass the real estate agent, your bank and the convenyancing agent. Be polite of course, but ask immediately if something does not make sense or look right.
Ask the agent how much the body corporate fees are, and how long the property has been on the market (if you hadn’t already looked it up online via sites like onthehouse.com.au). That will give you a sense of how much you should bargain. Don’t bother asking how many other people are looking at the property if not obvious on the inspection days – they will always not answer the question directly anyway.
Ask the bank about ALL the fees and your obligation to them so you have a clear picture of what you are signing your life away to.
Ask the conveyancing agent about all the important milestones/dates in the purchasing process. The good ones will tell you all this from the start.
- The conveyancing agent is meant to be your go-between yourself and your bank, the seller’s bank, and the relevant government authorities. They are meant to do all the talking and you just have to make sure that your funds is available on the day of settlement. “Meant to” anyway because in my experience, I was asked by the agent to clarify things between my bank and themselves. This added unnecessary stress because I was not expecting it. My advice: expect that this WILL happen.
- If you had a dodgy seller like I did, you might not be able to inspect the property until very close to the settlement date. If you were not moving out of a rental property and thus not adhering to a tight schedule, always insist on a re-cleaning and repairs of defects if things are not to your liking. I didn’t have such an opportunity and so was forced to accept the less than satisfactory level of cleanliness and a defective stove top which cut off the power to the apartment twice. Luckily for me, that was the extent of the issues.
- Don’t expect to be able to do or change everything in your new home immediately. Just enjoy the fact that you now own a piece of land / hole in the sky.
- Living within your means really take a lot of stress out of the mortgage payments. If you did your research right, you may even pay less than what you have been paying in rent.
This is not necessarily true but if you do your own homework and have financial discipline, it’s not as scary