Author: nuvismedia-team

For some, owning a home has been portrayed through various media channels as a bridge too far however you may be closer to owning a property than you think.

Here are the key factors to consider if you wish to take the next step on your property journey:

Stable employment status

Buying a home and being granted a mortgage means you need income to meet the loan repayments. To make these repayments, lenders need to be confident that your income is stable and consistent. There are many ways in which employees are remunerated (base, bonus, commissions…) so every individual’s case is treated differently. Additionally, different lenders have different policies that will make them view your personal position more or less favourably. Simply put, if you have a consistent ongoing income, then there is a lender for you.

Saving a Deposit

Previous generations of first home buyers have always purchased with at least a 20% deposit. With the average house price rising sharply in proportion to average wages, getting to this 20% figure is harder than ever. Lenders have many products for borrowers that have a 10% deposit… in fact, the smallest deposit you would need would be just 5% in some instances.

Consistency, consistency, consistency

Another sign that you may be closer to buying than you think is that you can prove how you have saved the deposit. Having a consistent and transparent savings history is a sign to a lender that you have been diligent and can demonstrate genuine savings. This is looked upon favourably by lenders as you can show that you are not only responsible with your money, but also able to save the equivalent of the repayment per month.

The understanding of debt and being smart about it

Having a sufficient deposit is one thing however being aware of the way lenders view debt is another. Debt such as credit cards and car loans can directly influence a bank’s decision about granting you a loan. Lenders understand that debt such as these are necessary for some however being financially savvy can help you set in motion decisions on either keeping or paying off these debts prior to purchasing a home. This takes careful consideration but can certainly be a factor in placing you in a more favourable position of purchasing sooner than you think. A well maintained repayment history on an existing debt wont harm your application, however an existing debt where you have missed or made late repayments will.

Property is for the long run

Having a stable income, being aware of existing debt and proving you have a sufficient deposit saved are all very important factors when deciding to buy. Understanding that property is a long-term investment and that the first property doesn’t have to meet all requirements is the difference between a savvy buyer that makes the most out of opportunities as oppose to a unconfident buyer looking for endless reasons why not to purchase.

A discussion with the team at 40 Forty Finance can analyse your existing financial situation and provide information on potential barriers within your application.

Expecting a child whilst simultaneously applying for a home loan can be a tricky and confusing process to understand. The excitement of a new addition to any family brings challenging barriers in the eyes of lenders with several factors influencing the loan decision process. It is therefore important for applicants to be aware of certain requirements and policy that will impact the final decision by the banks.

Here are some areas of consideration to be aware of:

Serviceability Challenges

Any addition to a family brings an extra mouth to feed and consequently an increase in living expenses. It is no surprise that the additional expenses and a reduction in income through maternity or paternity leave will directly impact your serviceability capacity for a home loan.

Banks will use different formulas to estimate cashflow to make a loan decision based on several factors involving, existing living expenditure, likely outflow once the baby has arrived and any predicted changes to your household’s income.

The banks are aware that although parental leave may be paid by the employer, it traditionally doesn’t last for the entire leave period. This means that there is likely to be a period of time where your household income will not sufficiently ‘service’ your commitments.

Is there a way?

Although it is more challenging for banks to approve a loan while on parental leave, it is still possible to secure finance. The easiest way to provide lenders with the confidence you can meet your household cash flow needs and maintain your mortgage is to show you have enough cash reserve available to cover the serviceability shortfall while on parental leave. For example, if your annual mortgage repayments is $20,000 and you will be off work taking unpaid leave for 6 months, then the banks would want to see cash reserves of $10,000 plus half of your household’s general living expenses in cash.

While some banks try to be flexible by considering the income on the applicant on leave, not all banks will do the same and therefore deem that applicant as unpaid or unemployed during this period. It is therefore an option for some to demonstrate employment through a letter by their employer outlining their role, return date and income that can be utilised in the decision process. This can help prove to lenders that the financial obligation will be met by the applicant when they return to work.

Already have a home loan?

If you already have a home loan in place and are expecting a baby then as long as you have been diligent with your repayments and can manage your finances then there will be no issues. It is important to plan well in advance to ensure your cashflow is managed and you can cover your existing repayments on top of the new addition to the family, particularly while household income is lower than usual.

Differing policies and lender requirements it can be confusing and challenging in understanding the options when applying for a loan whilst expecting a child. 40 Forty Finance can point you in the right direction through this challenging and complex process to ensure the right product is selected and necessary steps are implemented to put forth a strong application.

With auction clearance rates dropping across the Australia’s capital cities, it is important to know what happens once a property is passed in. If a property goes to auction and doesn’t meet the reserve price then it is the duty of the auctioneer to ‘pass in’ the property. Typically, the auctioneer will give first rights to negotiate to the highest bidder.

What are the buyer’s options?

The highest bidder has first rights to negotiate with the real estate agent and vendor. As the highest bidder, you can elect to negotiate in private within the property or outside if preferred. Often Agents will encourage you into the property to create a deeper emotional attachment the property they are trying to sell you. It is important to try and maintain a calm, professional and respectful negotiation technique. Remember everyone is working towards the same goal.

As a prospective buyer, you may ask the agent to disclose the reserve price before making any further offer. In Victoria, the agent is obliged to provide the bidder or bidders with a Statement of Information, which should indicate the potential selling price. It is therefore very important for the bidder to be familiar with recent sales in the area and have an understanding of the current market climate. As with all negotiations, information is power.

If the reserve price isn’t disclosed then the buyer may have to meet the asking price or risk losing their first rights advantage to other interested parties. Should there not be any other interested parties then the ball is back in the hands of the initial bidder to negotiate a price.

When negotiating as the buyer, you don’t have to make the same counter increments as the vendor so sticking to a plan and being aware of your options is important in sealing a deal. The buyer shouldn’t feel pressured to “meet the vendor halfway”. Remain strong in your position and certainly do not over reach your financial limits.

If an offer is accepted, contracts will be exchanged on the day with the same rules applying under auctions terms. This means that although negotiation has occurred in private, the cooling-off period still doesn’t apply and a deposit will be required…. The property is yours!

What are the seller’s options?

It is important to know as the vendor that although the property didn’t sell during auction then it doesn’t mean you won’t find a buyer. Some vendors might use this strategy to negotiate with a potential buyer on a best price instead of lowering the reserve mid-auction where the results might not be the same. For others it may be an indication that their asking price is too high or simply there isn’t enough interest in the property at the time. Either way, a proactive approach to understand reasons why the property didn’t sell and adjust for a new selling campaign should be implemented quickly.

Negotiation with a buyer on a comfortable selling price can be a tricky process. It is common for both parties to employ tactics for the best possible result however this has to be done in a respectful manner. A seller has the right to walk away or cancel the negotiation should the buyer negotiate too hard and in an unreasonable manner.

If the property fails to sell on the day of auction then the vendor can market the property through private sale. A review into the marketing strategy should be implemented to ensure that the property is advertised in a revitalising manner to entice new or old prospects. Once listed for private sale then it is up to the seller to choose whether or not to accept each offer or enter into a negotiating process with the help of a real estate agent.

If the reserve was set too high then the vendor can review this in consultation with the real estate agent. It is the choice of the vendor to reduce the reserve price before relisting for a private sale or keep it as it is.

As a seller it is important to keep perspective and understand why their property was passed-in. Most properties do eventually sell but acting swiftly and being open to suggestions is important for a successful result.

After a challenging few years of competition and record-high housing prices, first home buyers (FHBs) are making a resurgence throughout early 2019. Taking advantage of the property slump and reduced competition, FHBs are now playing their part and getting their foot in the door bringing a fresh sense of optimism. With recent clearance rates hovering around 55% in Melbourne, FHBs are making the most out of the market downturn and leveraging off small windows of opportunity.

The fall out of the Royal Commission and tougher scrutiny on investor lending has enabled this group to have greater success through the clampdown and reduction in interest-only loans. Although lenders have made it more difficult to secure finance, the prudent first home buyer is taking advantage of suppressed competition and scoring some fantastic opportunities.

Steps for first home buyers to secure a property

Selecting the right property

Even though prices have backed off, buyers need to take caution and not rush into perceived bargains. Considering the likely capital growth and use over a five to ten-year period is an important element in choosing whether to pursue a property or not. The property doesn’t have to be the ‘forever home’ however forecasting any life changes such as kids and lifestyles needs must be considered when selecting the right property. Establishing a list of non-negotiables and negotiable features of a property is a good place to start with the expectation that all features of a first home doesn’t necessarily need to be met.

Take control of your finances and be aware of requirements from lenders

Changes to lending are in full swing with lenders now scrutinising and assessing home loan applications as a result of the recent crackdown by industry regulators. It is now more difficult to secure finance with applications being declined at an all-time high. Not only is the prudent borrower researching and understanding the economic landscape of the property market but they are also doing everything in their power to ensure their application is as strong as it can be. In times of opportunity, FHBs need to be aware of their borrowing capacity along with thoroughly assessing their savings and expenditure history.

Ask for help if you need it

Home ownership is typically the largest and most important financial outlay for any FHB. It is for this very reason that many FHBs seek assistance and guidance in the purchasing process and in acquiring a home loan. As a FHB, it can be confusing to understand the method in being approved for a loan along with being aware of the necessary fees and charges associated with the purchase cost. A mortgage broker has become a key figure within the FHB financial team to ensure the product selected meets their needs and the loan process is efficiently processed. Asking for help in this exciting yet very important moment in a FHBs life is a clever action to ensure the process is a smooth as it can be.

A conveyancer is a critical player to have on your side during your property purchase. They are the legal practitioner who plays the important role of managing all the contracts, settlement monies and government registrations.

Here is a snapshot of the important roles that they undertake to ensure that the purchase of property is a smooth transition for both the purchaser and the vendor.

Review the Contract of Sale

The comprehensive detail outlined within a contract of sale needs to be reviewed thoroughly by your conveyancer to ensure that you as the buyer are fully aware of what you are purchasing. The contract of sale should include the following:

Before you buy

·     Details on the property outlining the fixtures and fittings. Items that are excluded from the contract may also be identified

·     Details of the vendor’s conveyancer

·     If you are buying off the plan, a sunset clause enables you to cancel the contract if the plan or development isn’t completed on time

·     A zoning certificate from the local council

·     A copy of the title of the property

·     Statement of any cooling-off rights

·     Explanation of how money is to exchanged hands and policy regarding breaches of contract

Once you have purchased

·     Purchase price and balancing owing at settlement

·     Date of settlement

·     Your name and vendor’s name

·     Any special conditions such as ‘subject to finance’

Your conveyancer may also recommend changes to the contract before you sign so it is important that all items are understood and agreed before the contracts are exchanged.

Define the monies that need to change hands at settlement

An important component of a conveyancer’s role at settlement is to define and identify any monies that need to be exchanged. Your conveyancer will calculate the settlement adjustments for water, council rates along with body-corporate contributions, rent and land tax that may be applicable.

Organise any government grants/benefits available to you

As a first home buyer you may be entitled to certain government grants and benefits if you fit the criteria depending on the state to which you purchase in. It is important for you and your conveyancer to be aware of any grants that may be accessible so this can be facilitated during settlement. It is the role of your conveyancer to ensure the right paperwork is submitted and processed so you can receive these grants at settlement.

Represent you on settlement day to ensure all monies go to the appropriate entities

On settlement day, your conveyancer will ensure that the allocated funds and monies are settled with the correct entities. There are many different entities that require money during settlement so having all this detailed and managed professionally will ensure a smooth and on time settlement. On settlement day there is a lot of bits and pieces moving so having an experienced conveyancer is important to ensure that you as the buyer are familiar with the processes and there isn’t any confusion during a stressful period.

 

Applying for a home loan is a lot like selling yourself to a lender. You are trying to demonstrate that you are trustworthy in meeting your repayments on time and that you would be reliable and worthy of a mortgage.

Responsible lending laws require a lender to undertake a ‘serviceability assessment’ to stress-test your financial position and capacity to repay a loan. With costs of living expenses increasing, lenders have been applying a higher degree of application scrutiny and analysis.

Most lenders now require as much as 3 months transaction statements from your transactional account to help verify your monthly cost of living. As a result, many prospective buyers are now undertaking a ‘Financial Boot camp’ to give themselves the best chance in securing a property and home loan. The notion of knuckling down for a concerted 3 month period will let you financially experience exactly what it would be like to have your home loan while proving to the lender that your cost of living is not too exorbitant to afford a home loan.

Best Tips for your Boot Camp

Set a plan and stick to it

Super charging your savings takes dedication and sacrifice so sticking to your plan is critical. A three-month savings boot camp will prove to a lender that you are diligent with your savings and demonstrate that you are a financially responsible and a desirable client.

Minimise and reduce any unsecured debts

Credit cards are factored into an applicant’s monthly expense at around 4% of the value of the limit. This means a card with a limit of $10,000 has an assumed monthly cost of $400. Even if you pay off your cards on time or don’t use them that often, banks need to include the debt as an expense as you may use it in the future. Reducing credit card limits or even cancelling cards can be a big help in ensuring your borrowing power is not impacted too heavily.

Be financially savvy

We all have those little habits that we know are limiting our cash flow. When saving for a home, it is a great time to be motivated to change your ways. With so many ways to overspend in our daily lives, focus and control is fundamental to minimise unnecessary spending. Some quick wins include: clearing credit card debt, spending more time making dinner as oppose to going out, review your car and health insurance premiums, restrict yourself to 1 take away coffee a day.

Get your friends and family involved

Being open about your saving goals and reducing expenditure to friends and family is an okay thing to do. It may come as a surprise but most people do share the same views in looking to save a dollar here and there. If you are open and transparent with your friends and family then they can understand your goal and possible set in place some alternate ways to socialise which are budget conscious.

It isn’t about cutting yourself completely off from engagements with friends and family but rather stick to your budget and make well thought out decisions on what you can spend your money on.

A buyer’s agent is a real estate professional who represents buyers in the purchasing of property. In the competitive Melbourne market, more prospective buyers are turning to Buyers Advocates to assist them in their search for the right property.

Top 3 Reasons to Use a Buyer’s Agent?

1. Knowledge of particular neighbourhoods

Buyer’s Agents are experts in researching and understanding the key underlying metrics that determine price values in any given suburb. A sound understanding and knowledge of recent property data can provide a buyer or investor with invaluable knowledge of recent market trends and potential capital growth. This data and information can ensure that buyers are aware of property values and locations reducing the chance of making an ill-informed investment decision.

Your Buyer’s Agent will also sit with you and very clearly define what you are after in your property search. Their in-depth knowledge of what is possible will enable your list of priorities to be appropriate to your budget and search area.

2. Negotiating and bidding

Bidding or negotiating a purchase can be a daunting task. Where emotions can interrupt, Buyer’s Agents will stick to the bidding range and will not be swayed under the heat of the moment in an auction environment. Knowledge of the likely competition and strategies to adopt will provide prospective buyers with an advantage and best possible outcome.

In an off market negotiation, a Buyer’s Agent will really come into their own. As they negotiate on property every week, they have experience with all the negotiating tricks to ensure the deal goes in your favour. 

3. Time saving

Finding the time to attend inspections or analyse properties while managing all other priorities in your life can be tricky. Buyer’s agents take the stress and time out of searching for properties by doing the legwork and then presenting only the select properties that match your needs. For some, the major drawcard of engaging with a buyer’s agent is having a team strategically and quickly provide options that may otherwise take you twice to three times as long. 

Is there a fee in using this service?

Buyer’s agents typically charge a flat fee for service or charge a percentage of the property purchase. Other fees such as representing bidding at an auction may come into place and an initial fee for service before the property search even begins. It would be good to budget around 1% of the purchase price.

How do you find a Buyer’s Agent?

There are a multitude of Buyer’s Agent services across the country however word of mouth is a great place to start. Ensuring that the service has a good reputation and is familiar or works within the area that you’re looking to buy is an important consideration to make.

At 40 Forty, we have select partners we work with depending on what area of Melbourne you are looking to purchase.