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The essential steps you need to follow for buying a house in Victoria
Buying a house in Victoria can seem like a daunting task. It can be hard to figure out the perfect time to buy. Especially when larger economic events like global inflation, war and high interest rates come along. If you’re uncertain about buying your first house or an investment property then there’s one thing we recommend. Spend as much time as you can researching. With more knowledge of the housing market, you’re far more likely to make a confident and informed decision.
To help you out on your property journey, we’ve put together a ten-step guide for buying a house in Victoria. We’ve included all the essential steps from finding the best location to getting pre-approval and moving in. Back yourself with these essential steps and you’ll be on the right track to buying your first property.
1. Find out if you’re ready for a new house
Before you dive right into the process of buying your first home, as yourself the big question – “Am I ready?” If you’re still having doubts about it then maybe you’re not quite ready yet. Being in a positive headspace can help bring more clarity to the whole house buying process. If you’re really confident then it’s time to start assessing your work situation.
One of the first things lenders look for is job security. High job security (12 months plus( will give lenders more confidence when it comes to approving a loan. The better your job security, the more chance you have of getting your foot in the door with lenders.
There are other factors that lenders look for like children. Banks fully understand that raising children can become costly. For each dependent you have, the amount you can borrow decreases. In some cases, a bank may decrease the amount you can borrow by up to $50,000 per child.
2. Review your finances and budget
Next, you’ll want to know how much you can borrow from the bank. This amount has a massive influence on buying a house in Victoria. There are many factors that influence the amount you can borrow. At this point, it’s best to talk to an accountant or financial advisor. They can help you establish what your monthly living expenses are.
When you have a budget in mind you can determine just how much you can afford to pay for your mortgage. Before approaching your bank it’s a good idea to apply for a credit file. Make sure you clear away any outstanding debts you may have. If you have any bad credit then it’s a sign you’re probably not ready for a home or investment property yet.
If you currently have multiple credit cards or loans to pay off, try and minimise these as much as possible. Reducing the limit on your cards can also help you secure a larger finance amount. If you’re struggling to meet outstanding credit card payments then reach out to your finance provider and try renegotiating the terms of your payment schedule.
3. The cost of buying a house in Victoria
After approaching a financial advisor, accountant, or lender, you should have a full scope of the costs associated with buying a house in Victoria. Here are just some of the costs you will most likely need to pay.
Legal and conveyancing fees
The cost of your conveyancing or legal services when buying a house in Victoria really depends on the property itself. There may be many legal checks that need to be carried out. We recommend putting aside at least $1000-$3000 for these fees.
The amount you pay for stamp duty tax depends on the state you live in. This stamp duty is applied to the purchase value of the property. There are many stamp duty calculators available online that you can use to get a specific quote.
Come up with at least a 10-20% deposit to secure a home loan. To avoid paying Lender’s Mortgage Insurance (LMI), you’ll need at least a 20% deposit. There will be low deposit home loans available but you will need to pay a higher amount for the mortgage insurance associated with it.
Investment property costs
There are additional costs you’ll need to consider if you’re buying an investment property. These costs include maintenance, insurance, property management, council, and water rates, land tax, and in some cases, body corporate fees. There will also be interest payments if you are borrowing.
Finance & insurance costs
If you are borrowing more than 80% of your house’s purchase price, you will have to pay LMI. This insurance is paid to protect the lender in case you fail to make your repayments. There may also be fees you need to pay for valuations, applications, and settlements. A mortgage application can cost anywhere between $200-$600 depending on the lender. A valuation could set you back $400-$500 if the bank doesn’t waive the fee.
Building and pest inspections
To make sure you’re really getting value when buying a house in Victoria, it’s always best to book a complete building and pest inspection. This should not be overlooked. Buying a house that’s riddled with pest issues could cost you far more down the track. Inspections tend to cost around $500-700. A small price to pay for ensuring that your property is structurally sound and pest free.
Additional costs you should consider when buying a house in Victoria include ongoing mortgage repayments, utilities, moving costs, council rates and strata fees, home and contents insurance, and mortgage protection insurance. There may also be repairs and maintenance to your home. So it’s a good idea to have $5,000-$10,000 in a savings account ready to go for emergency repairs.
4. Research mortgages and interest rates
Even if you’ve already saved up a deposit you should still take the time to shop around for finance options. Make sure you review and understand all the terms of a finance agreement before you sign on the dotted line. You should always scrutinise the following features of the loan:
- Interest rate
- The term of the loan (usually up to 30 years)
- If there are any options to redraw funds
- Can additional repayments be made?
- How often will the interest be calculated?
If you don’t have a deposit saved then getting full finance for the price of your new house may still be an option. With your rental history as proof of savings, you already have one way to show a lender that you’re a responsible saver. You may also have the option to get your parent to be a guarantor.
When it comes to interest rates for a home loan you will have to option; fixed and variable. Your financial advisor can assess your situation and advise on which option will better suit your needs. A fixed-rate mortgage is better suited to someone who is great at budgeting. A variable home loan has a bit more risk involved. Financial gains can be made when interest rates fall, helping you to pay off your loan quicker.
5. Getting pre-approval for a home loan
Securing pre-approval for a home loan should be your number one priority before you start thinking about buying a house in Victoria. After getting pre-approval you’ll know exactly how much you can lend from the bank and how much you can bid on when it comes to a house auction. To get a pre-approval from a bank or lender you will generally need to provide a credit report, proof of savings, income, and investments. After reviewing all of this information you will be granted pre-approval to borrow up to a certain amount if you meet the criteria of a bank or lender.
6. Choose your ideal suburb and type of property
It’s important to have a clear goal when it comes to the type of house you want and where you want to purchase it. That’s why it’s a good idea to come up with a checklist of priorities for your new house. Add your must-have items to this checklist. Here are just a few examples of items you could add to the list before you start house hunting:
- Location – is the house close to work, schools, family, and friends
- Public transport – are bus/tram stops or train stations close by?
- Future plans – Are there any plans for future developments in the area?
- Suburb character – does it seem like a friendly and tight-knight community?
Another way to narrow down houses and suburbs is to look up property prices. You’ll find plenty of property data out there that can tell you what the median price is for properties in the areas you’re interested in.
The type of property you want should be something that suits your needs. Are you single, in a couple or part of a family? All of these scenarios require different types of housing options. Here are just some things you should consider when deciding on a property type:
- House, unit, studio, townhouse or acreage?
- Do you have a preferred house style such as Victorian or modern?
- How many bedrooms or bathrooms do you require?
- Do you need access to a parking spot or room for a backyard?
If you wish to purchase an investment property there are different factors to consider. Are you planning to renovate and flip it? Maybe you’re planning on holding onto the property until it increases in value. If you’re looking for strong capital growth then you will need to find a property that can increase in value. This may take a while but here are some features to look out for which can be a sign of increasing value:
- Recent sale prices for the suburb
- Strong rental demand and tight vacancies
- Suburbs with high rental yields compared to property prices
- Upcoming zoning changes which can affect housing prices
- Is the house close to schools, shops, hospitals, and public transport?
- What will the maintenance costs be like for a property in the area?
- How many bedrooms, bathrooms, and parking spots will the property have
7. Real estate agent or buyer’s agent?
When you start house hunting consider reaching out to local real estate agents. Local agents will have a better insight on the local property market and they’ll be able to tell you what’s for sale, give you tips for buying in the area, and tell you how the property market is performing. There is a lot of information available online for buying a house in Victoria but never underestimate what you can get from a real estate agent early on.
Getting assistance from a buyer’s agent is useful if you are planning on buying at an auction. A buyer’s agent can also help you find suitable properties, negotiate with property sellers, and complete property background checks for you. A buyer’s agent can be there to support you throughout the entire process of looking for and purchasing a property. This service can help inspire more self confidence when the time comes for you to decide on a property.
8. Property inspections
While you’re looking for houses it’s vital that you get to know any house you bid on. The best way to really experience a house is to do a property inspection. Sometimes just walking into a house can spark an immediate emotional response. You may get positive or negative vibes as soon as you enter a house. First impressions aren’t always an indicator of how good a house is. So do your due diligence and try and watch out for the following things:
- Inspect the conditions of walls and ceilings for signs of mould and sagging plaster
- Do the windows and doors close smoothly?
- Test the taps for even flow temperatures and water pressure
- Check the condition of the hot water system and fuse box outside
- Inspect the condition of the guttering and drains, are they well maintained?
- Suss out the local neighbourhood to see if it suits your lifestyle
Prepare for a property purchase
After finding what looks like the perfect property there are a few things you should do before bidding on a house. You can get your licenced Conveyancer to request inspections for the house while they manage other legal searches. It’s also best to get a property valuation on the property. This valuation will help guide your decision on what the value of your offer or bid should be on auction day.
If you are ready to make an offer then we recommend you don’t low-ball less than 10% of the asking price. Low-balling may lead to you missing out on the house as soon as higher offers come in. When you’ve settled on a figure that’s right for you, contact the real estate agent representing the property and let them know how much you’re willing to put down for a deposit.
After your off has been approved you will need to exchange contracts with the property owner and pay the deposit. Neither you or the seller are legally bound to the sale until the contract of sale has been signed and swapped. If you have purchased the property through a private treaty you will have a cooling-off period. During this period you still have the option to cancel the sale but you will have to pay a penalty for it.
In the time between exchange and settlement (usually six weeks), you should be arranging the balance of the selling price by finalising finance with your bank or lender. At this point, you should also take out building insurance to protect your new property. When the balance of the purchase price and stamp duty is paid, the settlement of the property is finalised. You will receive the keys and title deeds to your new house and you will be able to move in!
Contact Wise Real Estate Advice
For sound advice every step of the way, it helps to have a real estate expert in your corner. The buyer’s agents at Wise Real Estate Advice are committed to achieving the best result for you. The Team at WREA have a wide range of skills to ensure a full-service experience from the moment you start looking for properties to signing a contract of sale. Get in touch with the buyer’s agents at Wise Real Estate Advice today to get your property purchase on track.