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House hunting

Discussion in 'The Pub' at netrider.net.au started by mr_messy, May 6, 2007.

  1. I've been looking from a place to rent and boy it's hard!
    And now it has got me thinking, how about buying a house to live in.

    What's involved.
    I'm pretty sure there is a massive amount of information out there. I think I'm just testing the waters buy asking here. Maybe there is too much information and it scares me I don't know.

    Can anyone tell me what is involved? In laymans terms or in a way a 10yr old might understand? :grin:

  2. +1 on the question. I've decided to buy a place to live in, or rent out if I can't find a place in my area but I have little idea what's involved. Advice would be good, ta. :)
  3. I'm no expert, but this is the order I'd recommend based on my own experience. I also thoroughly recommend going through a broker cos they will likely have a network of staff such as conveyancers that they'll get to do the ground work for you during the purchase. I went through Mortgage Choice initially - just be wary of the loan they're pushing and make sure it does/has everything you want.

    1. talk to someone about finance - find out what your finance budget is; approval in principal. That doesn't mean what YOUR budget is, but at least what your budget as far as finance is. Always buy within your budget, not what you are approved in principal for.

    2. work out YOUR budget - what you can realistically afford to pay back after everything you haven't admitted to the broker :) (this'll mostly be living expense type stuff - gifts, travel, extra money being bled elsewhere - cos otherwise you're breaking the T's and C's of the information you've given to the broker in the first place)

    3. Find a house. This is probably the hardest part ;)

    3. Put in an offer, preferably subject to finance and inspections depending on what you're allowed to do in your state

    4. Wait till your offer is accepted/rejected.

    5. If rejected, go back to step 3 :) If accepted, tell your mortgage broker and a whole bunch of stuff starts happening in the background.

    6. Stuff gets signed, finance company approves (or not) what you're spending their money on, at some stage you end up putting down a deposit - may or may not happen sooner depending on what state you're in.

    7. More stuff magically happens and sometime soon, you're signing loan docs and title stuff. Pro rata bills and stuff get sorted out dependent on the agreed settlement date.

    8. Wait for settlement/handover.

    9. Get keys

    10. Move in

    I *thoroughly* recommend going through a broker, especially one who has contacts/staff that do the conveyancing and stuff for you rather than you going and finding someone to do it - it's just one less thing to worry about and there's some good ones out there who're linked up with brokers. In the case of Mortgage Choice and Wizard, both of which I've had home loans through, the conveyancers I've had have been incredibly efficient and professional while still polite and helpful. Ultimately, you'll pay for the conveyancer either way, but it's a stressful time getting everything coordinated let alone having to find a conveyancer yourself (unless you have specific recommendations?).

    That's *essentially* my experience :) hope that helps some :)

    edit: one last thing .. it DOES cost more to buy a house. Don't let the whole "rent money is dead money" thing get you too worked up initially. Do your budget, do your sums, include insurances, rates, strata (if applicable), water, emergency services levy etc, maintenance, renovations, hot water systems ......... you get the idea. All the stuff you never had to pay for as a renter - they're all yours once you buy a place and they're the fees and charges and bills that no one tells you about!!! It IS expensive, much more expensive than renting, but it IS worth it :)
  4. Buying a basic house in melbourne will cost you the following:

    $15000 approx in stamp duty
    $5000 in legal fees
    Deposit. *Looking at $15000
    Mortgage Insurance. This is an insurance to protect the bank if you cant meet repayments - it doesnt protected you at all, just them. Variable depending on deposit (none if you have more than 20% deposit), but if you have no deposit this can be $10k or so. On a decent deposit (say $10-15k) is still normally $3-4k

    As such, anything without $50k behind you isnt gonna happen. Unless you buy a devine/delfin type thing where the house price is padded out by all this stuff....

    *While you can borrow 100% or more of valuation you'd be mad to, as you'll pay a far higher interest rate and much more mortgage insurance. Even loans to 95% of LVR are probably silly.
  5. Oh those figures are courtesy of a friend buying a place 30km out of Melbourne for about $285k in November last year, and may have changed slightly now.

    There are places you can look it up.

    My place in QLD was less for stamp duty (state tax), but the other costs are roughly the same - they're bank fees and charges and the same nationally.
  6. +1 +1 +1 +1 !!!!

    Make sure you thoroughly understand the stamp duty, mortgage insurance (insurance for the lender just in case you default - not optional unless you're purchasing with 20%+ deposit) and legal fees and all the stuff mentioned above. There are calculators out there that you can select your state and it'll tell you the mortgage insurance (if applicable), the stamp duty and transfer fees and all the stuff that is mandatory and certain percentages. Legal fees you can account a certain amount for (been too long since mine to give you a decent comparison with mine) but certainly don't forget about them - they're not cheap but there's not cut and dried formulae like the other fees.

    Also definitely keep that advice in mind with respect to how much of the valuation you're borrowing against. Sure you can borrow 100% (you can even borrow 110%!!) but you'll get pretty depressed if you're comparing those interest rates to the rates people are getting with their 80-95% LVR loans :)

    btw, LVR = loan to valuation ratio .. how much of the house's value you're borrowing. E.g. if the house is 100K and you have 5K deposit (excluding fees and stuff - just a basic calculation to demonstrate LVR), then your LVR is 95% and you'll pay mortgage insurance. If the house is 100K and you borrow 60K then the LVR is 60% and you are would be hard pressed to find someone wanting to charge you morgage insurance (unless you're a credit risk I'm guessing - the experts would know more ;)).
  7. Be aware of ALL costs even after your loan. It was the ongoing costs that bit me on the bum.
  8. :cry:
    I feel like I've just lost a whole lota blood from reading whats involved!
    I think I was hoping for something like a personal loan.
    Apply, get money, buy house then pay back.
    That just knocked the wind outta my sail.

    Good stuff to know obviously and thank you for your time to write it all down.

    I'm going to faint now! 8-[

  9. hahaha it's really not as bad as it seems :) just make sure if you buy a house that you can afford the house and then some and you'll have most other stuff covered. If you buy at the outer extremes of what you can afford, then you'll be in trouble :)

    As for the process itself, I knew nothing about the process other than "get money somehow" and "find a house" and "pay it back". Mortgage brokers know the process and know who to put you in contact with. For a start, if you're really serious about actually buying, go talk to a mortgage broker (there's even some on NR - miss_dj for example) and have a chat. The worst that's gonna happen from that is that they say "go away and come back in X time when you've saved Y for your deposit". There's no harm in finding where you stand now so you know where you need to be if you're not already all set to go financially.
  10. Thanks for the info, people. I am hoping we'll have saved a decent deposit over the next 2 or 3 years for our own place. Its hard to know where to start and just what's involved.
  11. It's something I REALLY wish I could have done earlier, because I wanted to buy much earlier. Thats an issue with the ex and the story for another day.

    One interesting trap is of course that while property prices are booming (like they did about 2001 to 2004) then the amount you can save in deposit per year is far less than how much the houses will go up.

    Even in a slow year where property prices go up only 5% (long term average house price increase), on a standard $300k house (doing well to get one that cheap) that's $15,000 you need more to keep your loan the same. While paying rent (probably another $10,000 a year).

    So... you need to pay $25,000 per year to rent and stay stationary.

    Nasty business. No wonder there's a housing affordability crisis and a generation of people who feel they will never be able to buy their own homes.
  12. Don't be discouraged, it's not as confusing as it looks.
    Once you have done your budget and found a home loan you are happy with, the bank will do most of the confusing stuff for you. Get your loan approved by the bank first before you start looking. Try to borrow a bit extra than you need to allow for the unexpected expenses as others have mentioned (or the bike upgrade :wink: ).
  13. Your figures are incorrect

    To buy for $285,000 you would need about $12,000 saved

    Your loan repayments would be around $1,950 a month

    Your upfront costs would be conveyancing around $1,600, Mortgage Insurance of $5,900, Application Fee $645, Stamp Duties $13,600

    And the Governtment gives you $10,000 First HOme Owners Grant
  14. Good explanation, yes borrowing at 105% of the purchase price will incur a rate loading.

    However, please note there are lenders who will lend you 100% of the property purchase price and not load the rate up.

  15. Assuming the lender will include the $10,000 grant as part of your deposit.

    So.... $13600 Stamp duty + $645 loan appluication fee + $5900 mortgage insurance + $1600 Conveyancing + $1950 first month repayment +$12,000 deposit + repayment of rates to seller + next quarter rates (probably $800) .

    Then add in moving costs, cancelling services and reconnecting, professional cleaning of the old rental property, some curtains because the owners took them with them as well as everything not glued on etc etc.

    While you may be able to do it on $12,000 you can literally do it on $0 deposit at all if you so chose.

    I dont think either is advisable though.
  16. I was replying to the following you posted. It can happen with much less then $50,000

    See my post above - FACT - you do not pay a higher interst rate at 100% with some lenders
  17. Buying a house is easy.

    1 find out how much you can borrow.
    2 work out if you can afford to pay what you borrowed back + rates, power, phone, water, insurance, food, fuel, etc, etc.

    Go find house, buy it. job done.

    Dont forget the extras like has been pointed out, stamp duty, legals, moving costs, utilities conection costs.

    Dont forget about first home owners grant.

    Now some of my advice:
    NEVER trust estate agents, they work for the SELLER not for the BUYER, basicaly there paid to screw every last cent out of you.
    NEVER borrow more than 80% of the value of the property, if you do you will have to pay mortgage insurance to protect the LENDER, they dont give a toss about you.
    Do research on the areas you want to live in, find out whats selling, whats not and why.
    ALWAYS get indipendant advice on the property from some one you trust, Mum, Dad, best mate, whatever, they will see problems with the property you dont.
    Get a loan with fixed interest for the first 3 - 5 years, yes rates may go down and you loose out BUT if they go up at least you dont have to find extra cash in the stage when you'll probably be strugeling for money a bit.

    If you need help call me, i love house hunting, estate agents have to be nice the buyer dosent :p
  18. Here are some tips I have learnt over the last 5-10 years...

    - Have as much deposit as possible, borrow as little as possible

    - Be aware of mortgage insurance if borrowing more than 70-80% of the value (this is not insurance for you, it is for the bank!)

    - Don't forget about stamp duty and other incidentals - they add up pretty quickly

    - Read contracts thoroughly and don't feel pressured into signing. also look at the conditions on the contract and cross out ones that are unreasonable - you might not get away with it, but it is worth a shot

    - Consider doing the conveyancing yourself. While it will only save you a few hundred dollars, it is one of the best ways to fully understand the buying and selling process, plus it is good to be in control of the process.

    - Read all those books and guides for buying real estate. It's like going into a dealer and buying a bike or car. You should understand the psychology of the situation - so you don't find your self manipulated

    - Don't forget that real estate agents work for the seller, not the buyer. They will be trying to get the maximum amount for the seller as well as increasing their commission.

    I suppose my view is fairly cynical, but this is a lot of money you are going to spend.

  19. great advice - thx everyone. we're also looking. i've been down this track a few times before but it's been a while, i always forget the detail of what's required and it's still daunting and hard work.

    any suggestions on good websites/other sources to get this info???
    oh baby, you sure know how to turn a girl on :LOL:
  20. anything in particular you recommend?