First home buyer’s guide

Gateway Bank

bank

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ContentsAn overview of the buying process 04 >

Are you ready to buy? 05 >

Laying the foundation – building a deposit 06 >

How much can I borrow? 10 >

Choosing and applying for a home loan 17 >

House hunting 20 >

How to purchase a property 23 >

Moving in checklist 26 >

Glossary 27 >

The Gateway difference 29 >

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Trying to navigate through the process can be difficult and will undoubtedly raise many questions. This handbook aims to serve as a handy guide for first home buyers; offering valuable information, tips and hints, as well as highlighting important considerations you might need to take into account as you journey along the path to home ownership.

After reading this guide, you’ll have an understanding of:

• The overall path to purchasing property, including the financial process involved

• Basic home loan terms and products available

• Key considerations and allowances you may need to make

While this handbook is a good starting point, it’s important to remember it is only a guide.

If you require more information or clarification, we’re here to help. Our Lending Consultants are just a phone call or email away. You can reach us on 1300 302 474, 8am – 6pm, Monday to Friday (AEST) or email us at memberservices@gatewaybank.com.au.

A guide to getting started Buying your first property is an exciting milestone but as with any “first time” experience it can also be daunting. As one of the biggest financial commitments you’ll make in life, there will be important decisions you need to make along the way.

An overview of the buying processThe process of buying a property starts well before you actually find a place you like. We’ve outlined the overall process for you in this high-level flowchart.

Review your finances: it’s important to take a deep dive into your finances before you start looking at properties. Be active in reducing existing debt and set a savings plan to save a deposit. It’s also important to review your spending habits so you can determine your current situation.

Determine your borrowing capacity: you can do this with helpful online calculators or speaking to a lending specialist.

Look for and decide on a lender: products, cost and service can vary from lender to lender so it’s important that you do your research and find a lender that suits you best. Once you settle on your preferred lender, obtain pre-approval to give you peace of mind as you peruse the market.

Start looking: with the initial paper work behind you it’s time to get out there and start looking at properties. Domain and realstate.com.au have great apps that let you search, save and share properties that take your fancy. They’re also great at syncing with your calendar, which is incredibly helpful when you’re trying to schedule numerous inspections.

Make an offer: when you find your dream home it’s time to arrange your inspection reports, such as building and pest inspections, and a strata search if you’re buying an apartment. If they all check out, you’re in the clear to make an offer, or bid at auction.

Contract exchange: if your offer is accepted, you will sign and exchange contracts. You may also find your 10% deposit is due. Once this is done you’ll have a cooling off period in case you change your mind. These periods vary depending on which state you buy in. Of course, if you buy at auction, you purchase the property and pay the deposit on the spot and there is no cooling off period.

Get the keys: after the cooling off period, there is generally a three to six-week settlement period. On settlement, you’ll finally receive the keys to your new property!

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Are you ready to buy?The prospect of becoming a home owner is certainly exciting but before jumping into the property market it’s necessary to determine if you’re in a financial position to do so. The last thing you want to do is put yourself in a tough spot money-wise. While each person’s situation is different there are certain things you should do before you consider buying a property.

1. Pay down your debt. A mortgage is a significant financial responsibility so ridding yourself of as much debt as possible will put you in a much better position in terms of your borrowing capacity and your ability to service the loan down the track. This includes everything from personal loans to credit card debt.

2. Build a healthy savings balance. Having a regular savings plan is not only a good way to prove that you are money-wise but it will also give you peace of mind if unexpected costs arise. Setting up a separate savings account will help make you accountable. Consider a high interest savings account (HISA) or term deposit (TD) to boost your savings with interest.

3. Strengthen your credit score. A credit score is a numerical figure that shows your reputation as a borrower. Lenders may use this information to decide if lending you money is worth the risk. Things like the type and size of credit you request on your loan applications, paying your bills on time, not applying for too many credit cards, paying off outstanding loans and credit card debt or your employment history can impact your overall credit score. If you haven’t ever looked up your credit score, now is the perfect time. You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies, such as Equifax, Dun & Bradstreet and Experian

833 - 1200

726 - 832

622 - 725

510 - 621

0 - 509

Excellent

Very Good

Good

Average

Below Average

833 - 1200

726 - 832

622 - 725

510 - 621

0 - 509

Excellent

Very Good

Good

Average

Below Average

What’s a good credit score?The higher your credit score the better. The ranges will differ slightly among lenders but this gives you a general guide.

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Laying the foundation – building a deposit

You can read more about additional costs on page 11 of this guide.

• Very few lenders will lend you above 95% of the purchase price unless you have a guarantor or security

• The larger the deposit the less you will need to borrow, and therefore the less interest you’ll pay in the long run

• The bigger the deposit the less risk you pose to a lender, putting you in a better position when applying for a home loan

When you’re buying a property having a sufficient deposit can impact you in a variety of ways.

If you’re trying to work out a savings plan for building your home deposit, we have a fantastic online calculator to show you how much interest you’ll earn if you put your money in a term deposit or a high interest saving account.

Do the maths!

If you’re looking to buy a property to live in, generally lenders require you to have 20% of the purchase price to avoid paying lender’s mortgage insurance (LMI). Which means if you’re looking to buy a property worth $500,000, you’ll need a home loan deposit of $100,000. That’s a hefty “pay-to-play” entry point.

In fact, in today’s environment saving a 20% deposit can take considerable time. RealEstate.com.au reported it would take 8.3 years for a single person looking to buy in NSW to save a 20% deposit. This doesn’t even take into account all the additional upfront costs associated with buying property such as stamp duty, solicitor’s fees and the like.

One of the biggest challenges for those looking to enter the property market for the first time is building up a decent deposit. Your required deposit amount will depend on whether you are buying a home to live in or as an investment.

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How much does LMI cost?

Lender’s mortgage insurance

• The size of the loan

• The amount of deposit you have

• If the property is for owner-occupier or investment purposes

What impacts the cost of LMI?

Of course, for anyone wanting to buy property sooner rather than later there are options to help first home buyers access the market even if they don’t have a sufficient deposit saved.

How to get your dream home sooner?

Allowing borrowers to forgo the need to save a 20% deposit, lender’s mortgage insurance (LMI) is often a popular way to achieve the dream of home ownership in a timely fashion.

LMI is an insurance policy that protects the lender from financial loss in the event that the borrower can’t afford to keep up their home loan repayments.

LMI can be paid upfront as a lump sum or can be applied directly to your home loan. However, be aware if you add the LMI to your loan balance this will increase your repayments and the total interest you pay over the life of your loan.

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So which is the best strategy?

Postpone buying property until you save up a sufficient deposit without the need for LMI, which can take years? Forgo saving a 20% deposit and purchase your dream home now with LMI? Or maybe forget achieving the great Aussie dream of homeownership altogether and forever rent?

Well, thanks to a new Buy or Rent Calculator from Genworth, the verdict is in!

This calculator helps you compare the benefits of three different scenarios:

• buying a property now using LMI, versus;

• delaying the purchase and continuing to rent and save for a 20% deposit, versus;

• renting and saving indefinitely.

The beauty of the calculator is that it provides a tailored outlook. Everyone’s situation is different and with the Genworth calculator you can punch in details specific to your circumstances to give you a view of each scenario. Why not give it a try?

Family pledge loan

A family pledge loan is another way to purchase a property without the need to save a deposit. It allows you to make up for the fact that you don’t have a sufficient deposit saved by using the equity in a family member’s property, or term deposit, as security for your loan. The person providing the assistance is known as the guarantor.

It is generally restricted to immediate family members such as parents, grandparents or siblings, however, some lenders can be flexible depending on your circumstances.

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What are the benefits of family pledge?

• No savings required. A family pledge provides access to finance immediately, meaning first-time home buyers can enter into the market faster, without having to wait years to build up their contribution.

• No lender’s mortgage insurance (LMI). Without a 20% deposit, most borrowers are required to purchase LMI. Having a family pledge guarantee removes the need for LMI and the hefty premiums that come with it, which can add thousands of dollars to a loan.

• Increased borrowing power. A family pledge loan increases borrowing power. With a guarantee, up to 105% of the purchase property’s value can be borrowed to cover set-up costs such as stamp duty, legal fees or even renovating if the property you purchase is run down.

• Limit the guarantee. Family pledge loans now require the guarantee to be limited to a specific amount. This allows the guarantor’s security to be released once the LVR on the borrower’s security falls below 80%.

• Using other assets. Many family pledge loans require a property to be used as collateral for the loan. However, some will let you use other assets so don’t forget to ask your lender.

Considerations for the guarantor

It’s important to know that the guarantor on your loan will be liable if you are unable to meet your repayments or you default on your loan. If the worst happens, and you do default on your loan the lender can sell your guarantor’s property to recoup any loss.

That’s why it’s extremely important for you and a potential guarantor to seek independent legal and financial advice before proceeding with a family pledge loan.

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Understanding the amount of money you can borrow before you start house hunting will give you a realistic idea of the type of property you can afford.

Your borrowing capacity will depend on your individual circumstances, but essentially lenders want to know that you will be able to afford your home loan repayments. A general rule of thumb is that your home loan repayments should not exceed 30% of your gross income.

There are eight key factors that lenders generally take into consideration:

1. The number of applicants applying for the home loan

2. Your income, income from investments and any other assets such as contents, vehicle, superannuation

3. Your debt levels, including personal loans, credit cards or student loans such as HECS/HELP

4. Your living expenses and commitments, this includes any dependents you have

5. Your credit history

6. The deposit you’ve saved

7. The type, term and interest rate of your home loan

8. The value and type of the property you want to buy and its location

There are online calculators that can provide an initial estimate of your borrowing capacity. However, speaking to a lender in person or on the phone will give you a much more accurate answer. They will be able to guide you and ask you the necessary questions and discuss your options.

Contact us

Call our specialist Lending Consultants today to discuss your options. You can reach us on 1300 302 474, 8am – 6pm, Monday to Friday (AEST) or email us at memberservices@gatewaybank.com.au

How much can I borrow?Your borrowing capacity is the amount of money a lender will loan you. Before you start looking for your dream home it’s imperative that you know your borrowing capacity.

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Additional upfront costs

Type Description

Loan application fee Some lenders may charge you a fee to process your application. It is used to cover things like credit checks, property appraisals and administrative costs.

Property valuation fee Lenders may require a valuation of the property to ensure the value of the property is greater than the loan amount.

Stamp duty This is a tax paid when transferring the title and ownership details of a property. As a tax imposed by state governments, the percentage you pay will depend on the state you buy property in.

Mortgage registration fee The Land Titles Office imposes this administrative fee for registering the lenders mortgage on the title record for the property.

Solicitor/conveyancer fees This is the cost of having a solicitor or conveyancer carry out any legal work involved with purchasing your property.

Building and pest inspections

It’s recommended that you carry out these standard inspections before you buy to ensure the building is structurally sound and there are no insect problems such as termites.

Strata search This cost is only applicable if you’re buying an apartment. The strata search will give you the history of the building in terms of past repairs, special levies, disputes, reoccurring maintenance problems, insurance details and more.

Home and contents insurance

This will protect you financially in case your home and its content are damaged by fire, storms, flooding or theft. It’s a good idea to have this in place right before settlement occurs.

Mortgage protection insurance or income protection insurance

If your ability to work becomes impaired it will be difficult to make your home loan repayments. These types of insurance are designed to take care of part or all of your repayments.

Utility connection costs When you move into your new home there will be costs to get your utilities such as gas, electricity and telephone connected.

Moving in costs This includes council and water rates, postal redirection and strata fees, if you’ve bought an apartment.

Many first home buyers are unaware that there are several other upfront costs associated with buying a property, on top of the purchase price of the property itself.

Forgetting to factor in these costs can leave you with a financial shortfall that could compromise your purchase. While these upfront costs vary, it is usually a good idea to set aside an extra 5-10% of the purchase price as a buffer to cover these costs.

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Seeking pre-approval

Smart first home buyers know that being prepared is the best way to make the home buying process efficient and smooth. Applying for a home loan can take time so it pays to apply for pre-approval with a lender before you start house hunting. The last thing you want to do is lose out on your dream home to more organised buyers.

Pre-approval gives you a good understanding of the amount a financial institution would be willing to lend you based on your current financial status. Items that will be assessed during pre-approval generally include; your income, employment situation, as well as the status of any credit cards or existing loans.

There are several benefits of obtaining pre-approval, including:

• It is free, valid for 90 days and there’s no obligation

• You can house hunt with the confidence of knowing exactly what you can afford

• It shows the real estate agent that you are serious about buying

• It can speed up the documentation process once you’ve found a home

A helping hand – the first home owners scheme and initiatives

When you’re trying to buy your first home you know every little bit helps. Thankfully, there are grants and concessions available for first home buyers to give you a head start. Every state and territory has different eligibility requirements for the grant and duty concessions so be sure to visit your state’s or territory’s office of revenue website to find out if you qualify.

• A completed application form.

• Evidence of your income such as pay slips and/or tax returns.

• Evidence of your savings such as bank statements.

• Evidence of your current debts such as credit cards and personal loans.

• Identification documents, e.g. a driver’s licence, Medicare card or passport.

What documents do I need to obtain pre-approval?

NSW revenue.nsw.gov.au

ACT revenue.act.gov.au

VIC sro.vic.gov.au

QLD treasury.qld.gov.au

SA revenuesa.sa.gov.au

WA finance.wa.gov.au

TAS sro.tas.gov.au

NT treasury.nt.gov.au

State/territory revenue offices

Check out this handy checklist that outlines all the documents you’ll need to prepare for pre-approval: gatewaybank.com.au/homeloanchecklist

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The First Home Owners Grant

The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000, to offset the effect of the GST on home ownership. Under the scheme, a one-off tax-free grant is payable to first home owners who purchase new dwellings.

General eligibility requirements for the FHOG includes:

• The property must be a brand-new home

• You are over 18 years of age

• You or your spouse (including de facto spouse) have never held a relevant interest in any residential property in Australia prior to 1 July 2000

• The value of the property must not exceed the First Home Owner Grant Cap (the cap varies between states and territories)

• You have not received a FHOG in any state or territory, unless subsequently repaid

• You need to live in the home for a continuous period of at least 6 months

• At least one applicant must be a permanent resident or Australian citizen

• Each applicant must be a person and not a company or trust

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Stamp duty exemptions and concessions for first home buyers

Most states and territories offer stamp duty exemptions or concessions for eligible FHB on the purchase of new or existing dwellings up to certain values.

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FHOG Stamp duty exemptions/concessions

NSW

$10,000 grant for the purchase or construction of new homes.

The value of the purchased property must not exceed $600,000.

The value of a constructed home must not exceed $750,000.

Exemption of stamp duty on new homes valued up to $650,000

Tiered concessions for new homes valued between $650,000 and $800,000.

Exemption of stamp duty on a vacant block of residential land valued at up to $350,000

Tiered concessions for vacant land purchased for between $350,000 and $450,000.

ACT

$7,000 grant for a new or substantially renovated home.

The value of the property must not exceed $750,000.

Concessions on new or substantially renovated properties.

The value of the property must not exceed $562,000.

VIC

$10,000 grant for the purchase or construction of new homes.

The value of the property must not exceed $750,000.

$20,000 grant for the purchase or construction of new homes in regional Victoria.

The value of the property must not exceed $750,000.

Exemption of stamp duty on new or established homes valued up to $600,000.

Tiered concessions for new or established homes valued between $650,000 and $750,000.

QLD

$15,000 grant for the purchase or construction of new homes.

The property value must not exceed $750,000.

Tiered concessions for new or established homes valued up to $550,000.

Tiered concessions for vacant land valued up to $400,000.

SA

$15,000 grant for the purchase and construction of new homes.

The property must not exceed $575,000.

Not applicable

WA

$10,000 grant for the purchase or construction of new homes.

Eligible properties located south of the 26th parallel of south latitude are limited to $750,000

Eligible properties north of the 26th parallel of south latitude are limited to $1 million.

Exemption of stamp duty on new homes valued up to $430,000

Tiered concessions for new homes valued between $430,000 and $530,000.

Exemption of stamp duty on a vacant block of residential land valued at up to $300,000

Tiered concessions for vacant land purchased for between $300,000 and $400,000.

TAS$10,000 grant for the purchase of a new home, buying a home off the plan or building a new home.

Not applicable

NT

$26,000 grant for the purchase or construction of a new home.

No limit applies to the value of the property you buy or build.

Exemption of stamp duty on established homes valued up to $500,000

Tiered concessions for established homes valued up to $700,000.

Current as at November 2017

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Home loan application timeline

OneThis is the first contact you’ll have with a lender. They’ll arrange a meeting – usually about an hour in duration – where you’ll discuss your situation and needs. They will determine if you’re eligible to borrow and help you choose the right home loan for you.

SevenIt’s then up to you to go through your mortgage documents with your solicitor or conveyancer. The signed documents will need to be returned to your lender. Again, timing will vary depending on your individual circumstances. Once you sign on the dotted line, your lender and solicitor or conveyancer will work together to book settlement. They will ensure the funds are available/transferred according to the contract of sale.

Two Once you select your lender and home loan, it’s time to submit an application with all the relevant paperwork. Timing varies at this stage, as it’s up to you to compile all the relevant documents. Gathering these documents can take a while so make sure you give yourself enough time. Check out our home loan application checklist on page 19 to see what you’ll need.

Three After you submit your application, it’s over to your lender. They will take approx. a week to assess your situation and borrowing capacity. During this time, they will also conduct a credit check.

1 HOUR 1-2 DAYS 1 WEEK

1-2 WEEKS

Four Your lender will arrange for an independent valuation report of the property you want to purchase. This allows them to determine your LVR. This valuation can take anywhere between 3 – 5 days depending on the company your lender uses.

2-3 DAYSFiveIf everything checks out, your loan will be formally approved. You will receive written notice from your lender that your loan is approved.

1-2 WEEKSSix After your loan is approved, your lender will take a couple of days to compile and send you your mortgage documents.

3-5 DAYS

It is important to note that this should only be used as a guide. Times are based on a borrower submitting all correct forms and supporting documentation upfront.

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Variable rate

A variable rate home loan will have an interest rate that can increase or decrease. This is generally decided by the lender in response to a range of internal and external market factors. Your repayments will vary during the life of the loan as a result so before committing to a variable rate home loan it’s worth thinking about whether you can maintain the repayments if the interest rate increased significantly. However, you also benefit if rates drop, saving you plenty of interest during this time.

Fixed rate

A fixed rate home loan will have the interest rate locked in for a specific period of time. Generally fixed rate home loans can be set for anywhere between 1 to 5 years. While it’s not common, some lenders are willing to offer longer terms so if this appeals to you it’s worth checking. As your interest rate doesn’t move during your set period, your repayments will remain the same, which can be handy for budgeting. If interest rates drop, however, you will miss out on paying less interest. There can also be expensive break costs and limits on extra repayments to take into consideration.

Interest only

A method of temporarily reducing your repayments is opting for an interest only loan, which allows you to pay the interest part of the loan only without any repayment of principal for a set period. The set period can range from 1 to 7 years, however, once this interest-only period ends you are required to start making principal and interest (P&I) payments. It’s important to note that these P&I repayments will be higher over the total remaining loan term, than if you had always paid P&I from the outset of the loan.

Choosing and applying for a home loanThere are several different types of home loans available. The one you choose will depend on your circumstances and what features you find most important.Home loans generally work on a principal and interest basis. Meaning over the term of a loan you repay the principal as well as the interest charged on the balance.

Low rate

If you’re looking for a no-frills, no-fuss home loan product, the low rate basic home loan is what you’re after. While it does offer the benefit of a low interest rate, it usually forgoes additional features and benefits that can offer you more flexibility and control. It is often a popular choice among first home buyers, because it helps reduce your ongoing repayments.

Low-doc

If you’re self-employed you may not have the documentation required to apply for a standard loan, like a group certificate or a letter from your employer. A low-doc loan allows you to get around this challenge by providing alternate paperwork but it’s important to note that while you may not be required to show the standard paperwork you will often be required to pay a higher interest rate.

Construction

A construction loan is used if you’re building a home as opposed to buying an established property. Usually these are shorter term loans which you draw down as required based on construction progress payments. In many cases these loans are set up as interest-only loans and typically they require a 20% minimum down payment.

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Split loans: a split loan allows you to divide your loan between variable and fixed rates, giving you the best of both worlds. You can choose the portion of the loan you’d like to fix and the portion you’d like to keep variable. Some lenders also offer multiple splits, so you can tailor the loan to suit your needs.

Mortgage offset account: a great feature to help you reduce the amount of interest you pay over the life of your loan. A savings or transaction account is linked to your home loan, the money you have in this account “offsets” against your loan balance and helps reduce the interest you pay. Not only does it help reduce your interest repayments but because it sits in a transaction/saving account, you still have complete access to the funds when you need them. Like the split option, most lenders will allow you to have multiple offset accounts so you can conveniently use all your different funds to offset the home loan.

Additional repayments: making extra repayments above your required minimum repayment amount can reduce the life of your loan and potentially save you thousands in interest payments. Therefore, having the ability to make additional repayments with no penalty is a feature worth having. Generally, variable rate home loans allow for fee-free extra repayments. However, fixed rate home loans often have a cap on the amount of additional repayments you can make in any given year.

Redraw facility: a handy feature that allows borrowers with variable rate home loans to make additional payments to their loan while simultaneously retaining access to these funds. You can put every dollar into the home loan, with the flexibility to redraw these additional payments when you need it.

Top-up: a loan top-up uses the equity in your home to allow you to borrow additional funds.

Portability: this feature lets you take your home loan with you if you move houses down the track. While the security – meaning the property – will change from your old home to your new one, you will retain the same loan account. This means you can avoid expensive break costs and establishment fees for a new loan.

Line of credit: this feature works like a large overdraft or credit card secured against your property. You can draw up to a pre-approved limit and then repay at interest only. Be aware that this feature often comes with a higher interest rate than a normal home loan.

Repayment holiday: if life takes an unexpected turn, it can be helpful to put your mortgage repayments on hold. This feature allows you to put your home loan repayments on hold for a limited amount of time, helping to free up cash flow during challenging times like transitioning jobs or an unexpected illness or injury, for example.

Most lenders will set a monthly repayment schedule. But did you know setting a more frequent repayment schedule – like weekly or fortnightly – can reduce the amount of interest you pay over the life of your loan? If you’re curious to see the difference, try out our home loan repayment calculator: gatewaybank.com.au/repay-calculator

Repayment schedule

Home loan features and facilities – the dream team

While the interest rate you pay is a determining factor when it comes to choosing a home loan, there are other features that you should consider especially if you’re looking for more flexibility and control.

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Home loan application checklist

Submitting a complete application with all the correct supporting documents usually means your loan can be processed quicker.

Use this simple checklist to help you prepare your home loan application. It is important to note that this checklist is only a quick guide and we may request additional documents after assessing your requirements.

Have questions?

Call our specialist Lending Consultants today to discuss your options. You can reach us on 1300 302 474, 8am – 6pm, Monday to Friday (AEST) or email us at lendingservices@gatewaybank.com.au

General checklistApplicant information

Home loan application form signed by applicant(s)

Copy of Medicare Card plus either a copy of your Drivers Licence or Passport

Existing home/car/personal/investment loan statements - last three months (plus an up-to-

date transaction listing or six months if refinancing / debt consolidation)

Credit card statements (last three months)

Transaction account statements – last three months (showing salary credits & expenses on

ALL transactional accounts plus an up-to-date transaction listing)

Most recent Council Rates Notice(s) (for all properties)

Removed Tax File Numbers (TFNs) on all supporting documentation

Proof of incomePAYG (for all applicants/where applicable)

Your two most recent payslips (digital copies)

Your latest PAYG summary

Rental/Other income

Recent rental statement or rental agreement

Recent Centrelink entitlement statement(s)

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By far the most exciting part of a first home buyer’s process, it’s easy to get swept up in the thrill and end up with a property that’s lacking or doesn’t suit your needs.

Thankfully there are plenty of ways to ensure this doesn’t happen to you.

Before heading out into the market, equip yourself with these handy tips:

• Make a list of priorities and compromises. If you wait to find the perfect property you may be waiting a long time. When it comes to your first home there will be necessities you absolutely require but you will also need to make sacrifices. Be clear about the nice-to-haves and what you’re willing to budge on versus what you’re not. This goes for the property you’re after and the suburbs you’d like to live in. For instance, is being close to public transport important, and if so, do you prefer a bus route or a train line?

• Research your favourite areas. Although it might sound old school, try taking your research offline and head to the areas you’re looking to buy in for an on the ground view. Walking or driving around a suburb can give you great insights that you simply can’t achieve with online research. This will help you narrow down suburbs for your consideration set.

• Download property apps. Realstate.com.au and Domain have great apps that let you search, save and share any properties that take your fancy. They’re also great at syncing with your calendar, which is incredibly helpful when you’re trying to schedule numerous inspections.

• Bulk schedule your open homes. Viewing open homes can be time consuming, which can leave you short on time to get other things done like chores. If you’re planning on seeing multiple homes, try grouping viewings together based on location so you can cover more ground in one day.

House hunting With all the paperwork out of the way, now comes the fun part, house hunting!

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What to do at open homes?

Do a walk through to take in the property. Before you start scrutinising and taking notes just let yourself absorb the ambiance of the property.

Take notes. This will help you remember certain aspects of the property after you’ve left but it also helps you compare properties.

Ask to take photos/video. The photos estate agents use when they are advertising the property can be deceptive. Your own photos or video will give you a more realistic picture.

Ask the real estate agent questions. Don’t be shy to ask the estate agent any questions you have about the property, it will help you build a rapport with them and show them you’re a serious potential buyer.

Open the closets and cupboards. Storage can be scarce, especially if you’re looking at purchasing an apartment. It’s worth looking in closets and cupboards to get a sense of how much space you’ll have.

Test the taps. This will give you an indication of the water pressure and if there are any leaking pipes or issues with water damage.

Check your phone reception. It might sound silly but if your signal isn’t strong you can assume a wi-fi signal might also struggle. You don’t want to end up in a signal black spot.

Look high and low. We tend to only take a superficial look at eye level but broadening our view can reveal important information. Specifically look for cracks, mould/water leakage issues or areas that have been patched up before.

Ask about council, water and/or strata rates. A loan pre-approval will tell you how much you can borrow but there are ongoing living expenses that you need to factor in. Get these upfront so you can rule out any properties outside your budget quickly.

Scope the competition. When you go to an inspection there will likely be others there too. The number of people present can give you an indication of how popular the property is. If you listen carefully to conversations, you can also get a gist of how serious other prospective buyers are.

Go back more than once. If you like a property it’s worth arranging more than one inspection. You’ll be amazed what you can miss on the first visit or how your perceptions can change.

Visit the property at different times. Particularly if the property sits on a main road, visit during peak traffic hours. Saturday may be a lot quieter then 8am on a Monday morning. If the weather permits, it might also be a good idea to visit the property during wet and dry weather.

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• Is the building and roof in good condition and structurally sound? The last thing you want is to move in and realise you need to undergo extensive renovations that can be inconvenient and costly. That’s why obtaining a building inspection report is important.

• Does the layout of the property suit your needs? For instance, do you prefer the bedrooms to be away from entertaining areas, do you like an open plan, are there enough bedrooms and bathrooms? If you plan on being in this property for a considerable number of years it’s also worth thinking if the property will sustain you if your circumstances change. For instance, if you plan on having kids will there be enough space?

• What are the noise levels? Depending on the time of day/night noise levels can change so it’s worth going to see your property at different times.

• Is the property near amenities like shops, transport, entertainment and medical facilities?

• Does the property have natural light? This isn’t just important from an ambiance perspective but if you’re in a dark, damp spot the property could be susceptible to mould.

• Does the property have sufficient parking? If you’re buying an apartment you might want to consider what street parking is like.

• Are the property’s facilities in good nick? This includes water pressure, air conditioning, hot water tank, lights, etc.

• Is the property located in a growth suburb? Is the lifestyle of the suburb suited to what you’re after?

How do I know if I’ve found my dream home?

Want to know more about a property or an area you’re considering buying in? Why not speak to one of our helpful Lending Consultants who can provide you with a complimentary property sales report or suburb report. You can reach us on 1300 302 474, 8am – 6pm, Monday to Friday (AEST) or email us at lendingservices@gatewaybank.com.au

Complimentary property sales report:

It’s easy to get excited about properties you inspect and view them through rose-tinted lenses. But it’s important to keep a level head and make an objective decision. Here are some things to consider to help you decide if you have, in fact, found your ideal property.

1. Why is the vendor selling?

2. Does the property have any issues? (Make sure you obtain your own building inspection report)

3. Can I have a contract?

4. Are there any other interested buyers? Have any offers been made?

5. Can you show me a recent property sales report?

6. How long has the property been on the market?

7. What’s the minimum asking price the vendor will consider?

8. What is included in the sale?

9. Are there any development applications submitted by the neighbouring properties?

Questions you should be asking a real estate agent:

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Private treaty means the vendor has set a sale price and is happy to negotiate individually with prospective buyers. If you find a property that is a private treaty sale here’s the process you will likely follow.

1. Set-up pre-purchase inspections: arranging building and pest inspections will alert you to any issues the property might have. While they may cost you upwards of $500, they can save you thousands down the track. Plus, you can use any defects to negotiate a better purchase price.

2. Strata search: this only applies if you’re buying an apartment, but like a building and pest inspection, this will tell you if the building is structurally sound as defects will be recorded, any reoccurring problems or issues that need to be corrected and, importantly, if the strata finances are in order.

3. Obtain a copy of the contract: have a copy of the contract for sale sent to your solicitor or conveyancer for review. Remember, you are bound to the contract once you sign it so make sure you understand and are comfortable with the terms of the contract.

4. Make an offer: if the pre-purchase inspections check out and you’re happy with the contract it’s time to make an official offer. This will need to be in writing and sent to the real estate agent. There will likely be negotiation that takes place between you and the vendor on the price so it’s wise to offer below what you’re willing to pay. It’s also important at this point to outline any conditions you want noted, such as changes to the contract, settlement timeframes and the like.

5. Sign the contract and pay a deposit: if the vendor agrees to your price and conditions you will sign a contract and pay a deposit. The deposit is usually 10% of the purchase price – paid via direct debit, cheque or bank cheque. Without signing the contract or paying the deposit, the vendor can accept a higher offer from another bidder.

6. Cooling-off period: once the contracts are exchanged, the cooling-off period begins. It allows you to withdraw from the Contract for Sale by providing written notice. If you decide to rescind the contract you must notify the vendor (through their solicitor or agent) within the allocated timeframe; you can’t cancel on the last day of the cooling-off period. Be aware, even though you rescind the contract, you will likely forfeit part of your deposit.

How to purchase a propertyPrivate treaty

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Each state and territory has different cooling-off periods so obtain legal advice from your solicitor or conveyancer to understand your obligations:

• NSW: 5 business days Fair Trading NSW

• VIC: 3 business days Consumer Affairs Victoria

• QLD: 5 business days Queensland Government

• SA: 2 business days Department of Premier and Cabinet SA

• WA: No cooling-off period applies unless contract specifies a cooling-off period Department of Commerce WA

• ACT: 5 business days Conveyancing Canberra

• NT: 4 business days Northern Territory Government

• TAS: No cooling-off period applies to any sale of property in Tasmania Consumer Affairs and Fair Trading Tasmania

(Note: In some scenarios you can choose to waive the cooling off period by requesting a Section 66W Certificate from the real estate agent. Be warned, that if you choose to waive the cooling off period, the contract is immediately binding.)

If you decide to proceed and make it through the cooling-off period, you enter into the settlement stage. Settlement can range between three to six weeks depending on your state or territory, though the terms can be extended or shortened if seller and buyer agree.

7. Finalise your home loan: if you obtained pre-approval from a lender, it’s now time to turn that into formal loan approval. Your lending specialist would now be familiar with your situation, so will be able to walk you through your options for choosing the right home loan product and go through all the relevant set-up requirements. Once your financial information has been verified and the property valuation conducted

and accepted, you will receive formal approval of your application. You now have a financial interest in the property. At this stage, therefore, some lenders may also ask you to take out home building insurance.

8. Final walk through: during the final week of settlement, you will make a final inspection of the property. This allows you to make sure everything is in the same condition that you bought it in and aligns with the contract.

9. Settlement date: this is the day you will become the official owner of the property. The balance of the purchase price will be transferred to the seller. Your solicitor will also work out any additional costs you’re required to pay, for instance, adjustments to council rates that have already been paid. Your solicitor and lender will work together to handle the loan settlement. Then Registration of Titles occurs. This is when the title deeds and mortgages will be registered at the lands office. Your lender will pay stamp duty (if this hasn’t already been paid) and registration costs to the government on your behalf.

10. Now it’s time to pick up the keys to your new home – CONGRATULATIONS!

Auction

Unlike a private treaty, there is no negotiation between vendor and buyer. Instead, the vendor sets a reserve – which is the minimum price at which they will sell the property – and potential buyers bid against each other. The property is sold to the highest bidder.

It’s important to be aware that there is no cooling off period with an auction. Once that hammer falls, the sale is final. That’s why if you’re planning on bidding for a property at auction, you must get your ducks in a row before auction day.

1. Pre-purchase inspections and reports: much like buying a property through private treaty, you should arrange building and pest inspections – and a strata search if you are bidding for an apartment – well before the auction day. This will give you time to arrange a builder or relevant tradesmen to

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come and inspect the property to advise you of potential costs to fix issues.

2. Obtain a copy of the contract: as the sale of the property is final when the hammer falls, it’s imperative you have your solicitor or conveyancer review the contract for sale and give you the all clear. Without a cooling off period you will be stuck with any unexpected surprises.

3. Pre-approval: securing your finance before the auction day not only gives you confidence as a bidder but also sets your bidding limit. Choosing to make a bid at auction without securing your finance is very risky and leaves you financially exposed if you are the highest bidder.

4. Register to bid: in some states you are required to register ahead of the auction day. The real estate agent will be able to guide you on the requirement for your state. If you are required to register, you will be given a bidding number to use on the day.

5. Make a bid: on the day of the auction be ready with your bidding limit and your deposit (if you are the highest bidder you will be required to sign a contract and pay a deposit of 5% to 10% of the purchase price on the spot). The auctioneer will start the process by giving a description of the house and then invite bidding to commence.

6. Outcomes of an auction: there can be two outcomes to an auction. If the auctioneer declares the property is “on the market”, it means the reserve price has been hit and the property will definitely sell to the highest bidder. However, if the reserve price is not met the property may not sell. This means you could have the opportunity to approach the real estate agent privately and enter into further negotiations.

If you were the highest bidder on the day, congratulations! You’re now a home

owner.

After the auction, the process becomes the same as if you were to buy a property through private treaty.

7. Finalise your home loan: after the auction it’s time to re-engage your lender. Let your lender know you’ve purchased a property and you require your conditional pre-approval to be formalised into a home loan. Your lending specialist would be familiar with your situation, so will be able to walk you through your options for choosing the right home loan product and go through all the relevant set-up requirements. Once your financial information has been verified and the property valuation conducted and accepted, you will receive formal approval of your application.

8. Final walk through: during the final week of settlement, you will make a final inspection of the property. This allows you to make sure everything is in the same condition that you bought it in and aligns with the contract.

9. Settlement date: this is the day you will become the official owner of the property. The balance of the purchase price will be transferred to the seller. Your solicitor will also work out any additional costs you’re required to pay, for instance, adjustments to council rates that have already been paid. Your solicitor and lender will work together to handle the loan settlement. Then Registration of Titles occurs. This is when the title deeds and mortgages will be registered at the lands office. Your lender will pay stamp duty (if this hasn’t already been paid) and registration costs to the government on your behalf.

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Moving in checklistNow there’s nothing left but to set yourself up in your new home. Here is a checklist to help make a smooth transition.

Connect your utilities (electricity, water, phone): before you move in you will need to disconnect the utilities in the previous owner’s name and reconnect them in your own. Remember to do some research before you choose a provider for your electricity and phone, to compare rates and services. There are plenty of comparison websites to help you do this:

• energymadeeasy.gov.au

• canstarblue.com.au

• comparethemarket.com.au/energy

Connect your internet: it’s wise to book this in 2 - 3 weeks before you move in. Due to high demand, most internet providers require notice before they can set this up.

Change your address: notify Australia Post of your new address and contact all your providers and government bodies, so your mailing address is up to date and you don’t miss any mail. A few places you may need to notify:

• RMS – your driver’s licence

• Insurance companies – health, home & contents, life, car

• Banks

• Superannuation fund

• Electoral roll

• Subscriptions

Make sure your insurance is up to date: now that you own a home there are certain insurances you might want to consider to protect you in case the unexpected happens. Some of these may be available to you through your superannuation fund so it’s worth checking before you take out individual insurance. For instance:

• Home and contents insurance

• Income protection insurance

• Life and TPD insurance

Organise a full house clean: you can choose to do this yourself or you can hire professional cleaners. While most vacating owners or tenants have the property professionally cleaned when they move out it is still worth ensuring another once over is done before you start moving furniture in. If you choose to hire professional cleaners make sure they specialise in end-of-lease cleans, that includes steaming carpets and giving the kitchen and bathrooms a thorough scrub.

Have spare keys cut: with so much going on it’s easy to lose keys for a new residence on moving day. It’s a good idea to have spare keys cut for all members of the household – if you’re not the only person living in the house – as well as a spare set to give to a close family member or a friend that lives nearby in case you ever get locked out of your house.

Tell family and friends: it sounds obvious but often we can forget to share the good news with our own network. While very close family and friends will likely be aware that you’ve moved, people you don’t see often may be missed. That’s why it’s worth sending a broad text or email to let people know your new contact details.

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Application fee: A one-off fee paid to a lender to cover costs of setting up a home loan. It is usually an upfront cost and can also be called an establishment fee, set-up fee or start-up fee.

Assets: items that you own, benefit from, or have use of, in generating income such as property, cars, shares, superannuation, savings, etc.

Basis points: one basis point equals 0.01% interest. Used chiefly in expressing differences of interest rates.

Borrower: a person taking a loan from a lender.

Break costs: the fee you incur when you make additional payments above your limit on a fixed rate home loan or when you pay off a fixed rate home loan before the full term expires.

Certificate of Title: the official legal document that proves ownership of property. It will generally include the property owner’s name as well as some identifying features of the piece of property.

Comparison rate: used to help borrowers see a more complete cost of a loan, it factors in the interest rate and any associated fees with the home loan – displaying it as a single percentage rate.

Conditional approval: when a lender has approved your home loan in principle, subject to certain conditions being met.

Contract of Sale: a contract between the seller and the purchaser, for the sale of the property.

Conveyancing: the area of the law that deals with transferring title/ownership of a property.

Credit report: prepared by credit reporting agencies, this report

shows your credit history. A good credit history report is usually required before a lender will approve a loan.

Default: when you fail to make your regular home loan repayments by the specified time.

Deposit: the amount of money required to secure the purchase of a property. It is taken off the purchase price when you eventually purchase the house/at settlement.

Draw down date: when you start using your home loan funds.

First Home Owners Grant (FHOG): the financial grants provided by various State Governments to purchasers buying their first home, to offer assistance in entering the property market.

Fixed interest rate: an interest rate that remains the same for a set period of time. At the end of the fixed period the interest rate will revert back to a variable rate or it can be fixed again at the current rates.

Freehold title: when a property owner owns the property in perpetuity.

Family pledge loan: a loan where a family member – generally an immediate family member like a parent, grandparent or sibling – uses the equity in their own property as security for your loan. Allows you to forgo saving a 20% deposit and the need for LMI.

Guarantor: a third party, usually an immediate family member, that uses the equity in their own property as security for your loan. If you default on your loan they might be liable to repay the debt.

Home equity: the part of a property that is not subject to interest from a lender – essentially the part of your home that belongs to you and not the bank. Is often

used as collateral to secure other loans.

Interest rate: the amount charged, expressed as a percentage of principal per annum, by a lender to a borrower for the use of funds.

Interest only home loan: a method of bringing down your repayments is opting for an interest only loan, which allows you to pay the interest part of the loan only without any repayment of principal for a set period.

Joint tenants: ownership by two or more persons of the same property. The individuals, who are called joint tenants, share equal ownership of the property and have the equal, undivided right to keep or dispose of the property.

Lenders Mortgage Insurance (LMI): a one-off insurance payment which protects your lender against your default. LMI is commonly paid when the Loan to Value Ratio (LVR) is 80% or more.

Liabilities: your existing debt or financial obligations, including credit cards, personal loans, etc.

Line of credit: a revolving line of credit is like a large overdraft or credit card secured against your property. You can draw up to a pre-approved limit and then repay at interest only. Be aware that this feature often comes with a higher interest rate than a normal home loan.

Loan agreement: a contract between your lender and you as the borrower which sets out the terms and conditions of the loan.

Loan to value ratio (LVR): the ratio of the home loan amount compared to (divided by) the value of your property. Usually expressed as a percentage. For example, a home loan of $800,000 for a home valued at $1,000,000 would have an LVR of 80%.

Glossary

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Low-doc home loan: for people who don’t have the usual financial records, such as self-employed. Different documentation is required to apply for the loan, in exchange for the borrower providing more security, usually mortgage insurance, higher deposits or even a higher interest rate.

Low rate: a basic home loan that offers a low interest rate, often at the expense of additional features and benefits.

Mortgage: a legal agreement by which a bank lends money at interest in exchange for taking title of the debtor’s property. If the mortgagor fails to repay the loan the bank has the right to sell the property to repay the debt.

Mortgagee: the lender of the funds to purchase a property and holder of the mortgage.

Mortgagor: a person who borrows money and grants a mortgage over their property as security.

Offset account: a savings or transaction account linked to your home loan, and the money you have in these accounts is used to reduce the balance you owe on your home loan.

Portability: the ability to swap a loan from one security to another.

Principal: he amount of money borrowed, excluding the interest charged. The principal is the amount on which interest is calculated.

Principal and interest (P&I): when your regular repayments include principal and interest components.

Rate lock: an agreement between you and a lender, when you choose a fixed rate home loan, where you can set an interest rate for a period when your loan’s approved. If interest rates go up before the loan drawdown date, you’re guaranteed the original rate.

Redraw facility: allows you to withdraw any extra repayments you’ve made on your home loan.

Refinancing: switching to a new loan from the existing lender or a different lender. Usually done when a better rate is being offered from another lender.

Repayment holiday: allows you to put your home loan repayments on hold for a limited amount of time.

Security: collateral used to secure a loan from a lender. Usually this will be the property you intend to purchase or a third party’s property, if you are using a guarantor. Be aware, as a last resort, the lender will sell the property to recover the debt if you are unable to service your loan.

Settlement: the process of finalising the exchange of prperty. The balance of the purchase price (the full purchase price minus the deposit) is transferred to the vendor in exchange for the certificate of title to the property and the keys to the property.

Split loan: the ability to divide your loan into fixed and variable rate options.

Stamp duty: a tax charged by State Governments when you purchase a property. Stamp duty varies per state and territory.

Strata title: a form of ownership devised for multi-level apartment blocks and horizontal subdivisions with shared areas. Owners hold the title of a particular lot in the strata plan.

Term: the length of time a loan is to be repaid.

Valuation: a report required by a lender to establish the market value of a property.

Variable interest rate: an interest rate that fluctuates over the term of a loan.

Vendor: the person selling their property, also referred to as the seller.

The Gateway difference

We get to know our Members and seek to understand your needs. Our products and services are personalised to every Member, helping you get the finance you need.

We make the process as easy as possible, by ensuring that you have access to a dedicated Lending Specialist from your initial enquiry, right through to your loan settlement.

So, if you’re ready to take the next step, we're here to help you every step of the way.

At Gateway, we differentiate ourselves from other lenders with our commitment to our Members.

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