The process of buying an established home compared to finding your dream house and land combination are worlds apart – established home purchases are so much easier and there are more opportunities to tailor your land lot and home. For instance, you can ensure you get your solar orientation rate and that your house design is aligned with your vision for your new home.
Ideally, at this point, you will have done your due diligence and identified the land lot you wish to purchase. Next step is committing to a contract where legal ownership (the certificate of title) is transferred into your name. During this process, you should hopefully have a licensed conveyancer or lawyer on your side. If you’re unsure where to start to find a licenced conveyancer – for more information check out Consumer Affairs Australia.
Land conveyancing comprises two steps:
You need to ensure you have unconditional pre-approval from your lender that will finance your land purchase. Be careful here – the bank is most likely going to give you a total sum of money. In this sum, you should account for all the items you plan on committing to in your purchase.
In regards to buying land, or any property for that matter, it is not normally conditional on finance approval. Therefore, once you commit to the purchase you must complete the contract whether you have the funds or not. A contract is deemed binding post-deposit payment – contracts are signed, dated and exchanged.
Be aware of the cooling period and how it works. In Victoria a cooling period exists for 3 days, however, you it’s worth reading up on the terms and conditions at CAA.
Before you get too excited about a purchase, seek advice on what your budget is. Make sure you have a clear understanding of what your financial situation will look like. While there are numerous calculators online you can use, they’re indicative only – it’s always better to get an accurate assessment from a professional.
When it comes to finance, you have two options:
The above choice is completely up to you. Be careful not to look solely at the bank interest rate – this is only one component of the product. You need to look out for all fees and charges that can impact you. Here are some good things to keep an eye on:
This is where a mortgage broker can be an excellent partner. They can cover all of the above for the scope of providers you are considering.
Make sure your mortgage broker has an ASIC credit licence or is a licensed credit representative.
If you are purchasing your first home, your lender or mortgage broker should be able to help you with applying for the First Home Owner Grant and any other incentives and concessions that are available to you.
You’ll also need to save a deposit. Generally, the more you save the better. You should aim to cover at least 5% to 20% of the cost of the home – meaning the land and house price together, including stamp duty fees.
As a rule of thumb, your saving history is an important attribute to demonstrate to your bank. The greater the amount you have saved – and the longer you’ve been saving for – the better. Several banks will have a minimum expectation for saving history. This all helps to give your future lender a level of comfort that you can service the loan.
For your new home, you need a separate home construction loan. A unique feature of a construction loan is that funds are released through a series of progress payments at different stages throughout the home construction process.
As outlined earlier, you need to seek funds for both your land lot and home price. In regards to your home, the more you include in your contract the easier it may be for you to ensure you can secure funds. The last thing you want to be worrying about when you move into your home is how do I pay for my driveway, my blinds, any additional furniture I need, and so on. Be clear with your credit representative what you will need throughout the process – it’ll make your life easier down the track.