12 Step guide to buying property in Australia

Buying property in Australia | Beanstalk Mums

When it comes to financial goals, buying a property is certainly one that features on the list for many Australians.

In recent years, single women in particular have been moving to property investment in droves as a means to secure their long-term wealth. (Which makes me do a little internal happy dance every time I think about it.)

Though let’s be honest, in a property market as competitive as Australia’s, buying a property can often feel like a daunting task. The steps between wanting a property of your own and actually getting one, can seem very disconnected.

So, let’s break it down step by step, remove the jargon and finance fluff, and get more comfortable and confident with the process of buying a home. Ready? Let’s do it!

12 Step guide to buying property in Australia

1. MINDSET

When you’re purchasing a property, it’s normal to experience a few hiccups along the way. Whether you miss out at an auction or receive a less than impressive building report, there will be times when you wonder if it’s all worth it.

However, with the right mindset and the right support – we believe the journey is absolutely worth it.

2. EXPENSES (ONE HOUR)

Do you live for that morning coffee or weekly bottle of wine? Have dance lessons or soccer team fees to regularly pay for?

When it comes to your loan, it doesn’t matter how much your monthly expenses are, so long as your budget is realistic. So, try and be as honest as possible (with your mortgage/financial adviser, and yourself!) about your actual expenses.

Pour yourself a glass of wine, be kind and turn this into a fun goal setting task. Already feeling the anxiety setting in thinking, ‘I’m just not great with money?’ We call BS – we need to get better at talking to ourselves about money and here’s our guide on how to do it.

In terms of a deposit, we recommend aiming to save between $20,000 – $100,000 for an initial deposit, depending on your circumstances and/or whether you are taking advantage of any schemes available to you (more on that below).

3. BORROWING POWER (30 MINUTES)

In terms of borrowing money from the bank, there’s an amount you could borrow and an amount you should borrow. It’s all about finding that sweet spot so you can live a life you love, in a home you love.

There are lots of different paths to take, so knowing exactly what your borrowing power is can go a long way to giving you peace of mind that you’re not going to overextend yourself.

As a very general rule of thumb, most banks will lend you a maximum of six times your income.

We recommend booking in a meeting with a good mortgage broker to help you with this. They will have access to many different lenders across the market and will work hard to get you the best deal and right fit for your situation. If those conversations are full of all of the jargon, feel free to use this guide, to demystify the home loan language.

Hot tip: Most of the time, working with a mortgage broker doesn’t cost you a thing – it’s the bank you take your loan out with, that pays them. We can’t recommend using a good broker enough, it will ease so much of the stress associated with buying a home.

4. DEPOSIT (ONE – SEVEN YEARS)

A 20% deposit is great if you can manage it, and it will save you from paying a fee known as Lender’s Mortgage Insurance (LMI). However, these days, not having a hefty deposit is not necessarily a deal breaker.

If a 20% deposit is out of the question for you, there are also low deposit and no deposit options available, depending on your circumstances. With the government introducing the Family Home Guarantee (FHG) in the recent budget, this is a great scheme to take advantage of as a single parent.

Fun fact: It takes the average couple living in Sydney six and a half years to save a 20% deposit for a home in Sydney. So, if you’re feeling frustrated at how long it is taking, just know you’re not alone, and that average time is long!

5. GOVERNMENT SCHEMES (TWO WEEKS – THREE MONTHS)

There’s nothing quite like helping people buy their first home and, with the many grants and schemes available right now as well as record-low interest rates, there really has never been a better time!

We’ve broken down each of the grants and schemes available in each state or territory on our website, or we’re more than happy to walk you through your options – over coffee if you prefer!

Fun fact: More than 10% of placements for the federal government’s First Home Loan Deposit Scheme (FHLDS), went to those 40+, showing that it’s taking Australians longer and longer to buy their first property.

6. PURCHASE BREAKDOWN (ONE DAY – THREE DAYS)

We like to come back to our clients with a purchase breakdown to help them understand all the forgotten costs of buying a property:

  • Stamp duty
  • Legal fees for a conveyancer
  • Building and pest reports

(Yep – it all adds up!).

Once our client decides on a purchase breakdown, we then come back to them with different lender options, with a breakdown of their rates, repayments, annual fees and any hidden benefits. This process can take anywhere from one day to a week, depending on how quickly our clients decide on a purchase price and loan amount.

HOW TO BUY PROPERTY IN AUSTRALIA (CONT.)

7. THE FINANCE (THREE DAYS – FOURTEEN DAYS)

The golden rule of property hunting: Get pre-approval before you start looking at properties.

This means that when you do find ‘the one’, you’ll be able to move fast!

The beauty of working with a finance specialist is that they can help manage the entire finance process, hurrying things along at the bank and shielding you from the stress, whilst ensuring you get approved on time. All you need to do is dig up a couple of recent payslips, 100 points of ID, some recent bank statements and they can manage the rest (for free!).

8. THE CONDITIONAL PRE APPROVAL (THREE DAYS – THIRTY DAYS)

Once your application has been signed and lodged, your conditional pre-approval can take anywhere between one and thirty days to come through. It really depends on the bank, how many applications they are receiving, and how quickly they are assessing them. Your broker will be able to tell you how long to wait…

Congratulations! Your Conditional Pre Approval has come through! You should be issued with a nice shiny letter for your records.

At this stage, your loan is approved in theory with the bank outlining a few leftover ‘conditions’, before granting you Unconditional Approval. These leftover conditions are usually things like a valuation on the property you are hoping to buy, once you’ve found it. A good mortgage broker and a good solicitor will help you to take care of those final conditions, outlined in your Conditional Approval letter.

Hot tip: Was one of your conditions, closing your credit card? No need to rush ahead to close it just yet – you’ll only need to close it once you’ve secured your property.

9. THE PROPERTY (ONE WEEK – SIX MONTHS)

Ready to say goodbye to your Saturdays and go on a property hunt? To make your life easier, have a look at recent sale prices of similar properties in the area you’re looking to buy. This way you become more familiar with the market and set your expectations at the right level.

If you find it all too overwhelming, a buyer’s agent can help you find and negotiate on a property for a fee. This could be a good option for you, particularly if you’re short on time or get a little stressed at auctions.

Fun fact: In 2020, 43,000 Australian’s moved from cities to regional areas. This is up from 19,000 in 2019.

10. MAKING AN OFFER (THREE DAYS)

So, you’ve found the property of your dreams and you want to make an offer? Fantastic!

In some circumstances, you can buy a property prior to auction. However, it’s really important to get a solicitor to look over the contract to make sure there are no hidden nasties. Your solicitor is there to protect you legally, so make sure you engage someone you feel comfortable with.

11. SETTLEMENT (42 DAYS)

After you’ve put the shiny ‘SOLD’ sign up, there is a period between when you have paid your 10% deposit and both parties (buyer and seller) have signed the contract at the agreed price (‘exchange’), and when you actually get the keys (‘settlement’). This is when we would order a valuation on your behalf.

Exchange to settlement is typically 42 days, et voila – you’re a homeowner!

Fun fact: Did you know, the average age of a first home buyer in Australia is 36?

12. ANNUAL REVIEWS (ONCE A YEAR)

The thing about a great home loan is that it doesn’t always stay great. Banks can be sneaky, and sometimes they adjust interest rates over time. Considering that property is an investment, you should always be looking to make sure you’re keeping your costs as low as possible, which means keeping tabs on your home loan interest rate.

At Pure Finance, we’ve instituted our industry-first annual rate review process where we continually negotiate with our client’s lender every 12 months to ensure the lowest possible costs on their loan are maintained. Neat huh?

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And there you have it! It doesn’t seem quite so daunting when you break it down, and remember, while purchasing a property is absolutely a big decision, people do it every single day (and live to tell the tale!).

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Chandel Brandimarti

Chandel Brandimarti

Chandel is the Director of Strategy + Loan Advisor at Pure Finance, and the Co-Creator of Ladies Talk Money. Having spent her early career working as an actor and in hospitality, she understands the trials and tribulations of living a financially precarious life, and now revels in the chance to help clients get (and pay off) a loan in a way that empowers and supports them.

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