Downsizing, Upsizing, Seachange or Treechange
This article is intended for people who have already owned a home rather than first home buyers although much of what I wrote there still applies, especially if you don’t have much of a deposit. It isn’t specifically about new homes – just buying another home, although all is relevant to new homes as well.
I have also written an article on bridging finance that may be applicable to you if you have not yet sold your existing home and don’t really want to have to rent.
One of the major differences between buying a new home as opposed to an existing home is that there may be incentives in terms of cash bonuses or stamp duty concessions even though you are not a first home buyer. Unfortunately with seven states and territory governments making door stop decisions and retractions it is near impossible to cover these confidently in detail. If you are buying an established house then firstly don’t forget to allow for stamp duty – on average allow 4% and so I refer you to you state’s office of state revenue – Offices of State Revenue Web Links New South Wales | Victoria | Queensland | Australian Capital Territory | South Australia | Western Australia | Northern Territory | Tasmania.
When I was buying my first home, you could buy a vacant block and build a new house for significantly less than buying an equivalent established house. That is still the case in some states however GST, state levies and local government charges have forced up the cost of development to such a degree that I believe that in Brisbane a new house can be $70,000 more than an equivalent established house.
Of course with a new house you get to choose style and design – you decide within reason the size of rooms and the quality of the fittings and even the structure – but usually this is only for the buyer who has sufficient funds to pay for all of this.. and an architect. For many people with more modest budgets they select a plan or design from what they see in project display homes and so are constrained to what the design can accommodate. Virtually all new homes have to comply with minimum efficiency and fire resistance and this can be a real benefit. It is unfortunately true that display homes often have better quality fittings than the plan specifications allow for and so you may not get what you hope for. However with a new home all of the equipment is new and everything has a warranty and if you have had a say in the design it is truly ‘your new home’.
With an established home you may be buying something with character and hopefully established garden – even the street scape on an established area can be a major draw card. Many established homes have passed the test of time, with real timber trusses etc. I remember living in my parents home where all around luxurious looking new brick veneer homes appeared – and yet in the big storms it was always the new houses that came off worst. However you may also be buying someone else’s problems, older houses simply require more maintenance and it is very common that new owners embark on some degree of renovation in order to place their stamp on the home. Do not underestimate this when calculating your finances.
One of the first things that you may notice when applying for finance for a another home is how much more paper work and documentation is required. This all due to the National Consumer Credit Protection Act ( NCCP) and act intended to protect you – in fact it smothers you in protection! Thankfully the legislation applies equally to mortgage brokers and lenders, something past regulation didn’t do. That aside the rest of the process has not changed a great deal – we need to see your payslips, or tax returns for self employed, your bank statements showing where the funds are coming from and any other information about income such as rental statements or expenditure such as car lease etc.
Once we have all that we can do a full assessment and provide you with a formal recommendation, proposal and quotation ( all as required by NCCP). Then if you are happy and appoint us as your mortgage broker we can proceed to lodge an application. With most lenders this done online – of course before submitting we will present you a printed summary of the full application so that you can see exactly what we are stating and applying for in your name.
If you haven’t decided on the property your application will be for a conditional approval but please understand that only a few lenders issue conditional loan approvals that can be relied upon. It can be very stressful to discover after making an offer that the lender has not even looked at your payslips and they suddenly start asking for more information – it can be disastrous to find out your application is not going to be approved, especially after the cooling off period has expired – please seek professional advice.
Once the valuations are completed (not all deals require a valuation) then the lender issues an unconditional approval and instructs their lawyers to prepare the mortgage documents. We strongly advise that you get legal advice before signing these document, they are after all a binding contract – mortgage brokers are not legally qualified and so are not supposed to provide advice to you on the mortgage contract.
Once the mortgage documents are returned to the lender they then ask their lawyers to prepare for settlement, usually around 10 days later the loan will settle and you can take possession of your new / old home.