deposit on house

Making an offer on a house – things you must know

by Chris Lang on August 11, 2012
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In any private sale making an offer on a property is one of the important steps. If you make an offer and it’s accepted – just keep your part of the deal and the house is yours.

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Plan before buying a house

by Chris Lang on July 21, 2012
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When you are thinking about a budget for a house you’re going to buy, there are 2 main money questions to think about. The first question is “How much?” and the second is “When?”.

Basically what I am saying is not only the amount matters, but also the time frame – when you have to pay it. Why? Because you may not have the whole amount up front on the day you’re signing the contract, but

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Expenses you must know about when buying a house

by Chris Lang on March 14, 2012
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When people are planning to buy a house, often the first question they think of is “Do we have enough money for a deposit?”. This is a good place to start, but the expenses involved in buying a house don’t just end there – in fact, there are many more costs people should know about […]

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6 killer tips to save up for a deposit on a house

by Chris Lang on December 10, 2010
6 killer tips to save up for a deposit on a house

Saving is a habit. I am going to be bold here and say that you are either a saver or a spender. All the savers in the house – my tips probably won’t reveal anything you didn’t know before, but they may refresh your memory. All the spenders in the house – read closely, follow […]

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A First Home Saver Account: Get Your Free Money From The Government

by Chris Lang on July 29, 2010
A First Home Saver Account: Get Your Free Money From The Government

If you’ve read my recent article here, you know that it takes a young couple about four and a half years to save up for a deposit. I don’t know about you, but I think saving is difficult. It takes discipline. It takes sacrifices. So it only seems natural that one would want to be […]

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Buying a house: the great Aussie dream or the great Aussie nightmare?

by Chris Lang on July 12, 2010
Buying a house: the great Aussie dream or the great Aussie nightmare?

Saving Money Let me ask you a question:

If you’re 25 now and dreaming of buying a house, how old will you be when you actually move in?

According to the latest report from Bankwest, the correct answer is “almost 30, and you can’t do it alone”.

But why? Because the time it takes a young couple (not a single person, but a couple!) to save $85,000 for a deposit (a mere 20% of the median house price) is 4.5 years. Buying a unit won’t be much of a shortcut – you’ll have to spend 4.3 years saving, almost the same time.

Shocking? That would be an understatement.

This calculation implies that a couple should save 20% of their gross income annually, to get there. This means that it will be even a larger proportion of their net income.

Just one year ago, instead of saving 4.5 years, the same couple with the same income had to save up for just 3.7 years. This is the problem with boosted government grants, you see – they blow up the prices out of proportion, and then the grants are reduced to pre-boost levels – but the prices remain ridiculously high.

I don’t really see a way around this situation. Unless house prices return to reasonable levels due to some divine intervention, or unless people are willing to compromise and choose to buy a house in a much less expensive area, it will be necessary save for that long. Not many people will be in a position where they can save more money faster, because it takes at least 2 major, not easily achievable, components – a high wage job and discipline.

Those interested to see areas where they can buy a house quicker should have a look at the maps in the report – the color-coding shows which areas are more affordable then the others. Choosing a more affordable area can halve the time spent saving.

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The pros and cons of non-bank lenders

by Chris Lang on July 19, 2009
The pros and cons of non-bank lenders

Men shaking hands on a roof of a houseYesterday I was thinking about this crazy surge of first home buyers, purchasing properties while the Boost and the Bonus last, and how strange it looks in this kind of economy.

I know, everyone has their reasons an life doesn’t stop just because we went into recession, but if I was buying now – I would think hard about who I want to borrow from.

If you haven’t lived in Australia for long, this thought might not cross your mind – nonetheless choosing your lender is very important step in buying your house. Here are some considerations for you to think about, when shopping for a loan.

There are many lenders, some of them are banks / credit unions and some are non-bank lenders or so-called “Mortgage Managers”. There are pros and cons to non-bank lenders, and I would say that now, in this economical climate, the cons outweigh the pros.

Pros

  • They will give you a loan even if you don’t have a deposit.
  • If you are self employed, they might ask for less than a mountain of paperwork to prove your borrowing capacity.
  • They are more forgiving to dodgy credit history.

Cons

  • Their loans are not cheaper than the bank’s loans any more.
  • They used to lend for less and that was their way of getting customers, but now this isn’t possible any more.

  • If there is interest rate cut and you’re on flexible interest loan they may or may not pass it on to you.
  • If RBA raises the interest rate, a non-bank lender will most definitely pass it on to you, whereas a bank might decide they will take the hit and won’t raise the interest rate to avoid putting people in mortgage stress.
  • Their loans often have high exit costs.
  • Why is this important? Assuming that there was a rate cut which they didn’t pass on to you, you have found a much cheaper loan elsewhere and want to refinance, the exit costs kill a large part of that profit.

  • They will repossess your home and evict you much faster than a bank, for the following reasons.
  • Banks are bigger and stronger, regulated better and have more ability to withstand your default and give you the chance to recover.

    Non-bank lenders are smaller and take more risk allowing you some time to get your act together and come up with the money. Because if you eventually don’t, they will be forced to sell your home later, and then there might be many other repossessed homes on the market – so the prices will drop and they won’t recover the loan back.

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Is my money safe in a bank?

by Chris Lang on April 3, 2009
Is my money safe in a bank?

Money in a piggy bankThis is not a pure paranoia speaking – any recession is a weird time and strange things can happen. In the past 12 months we’ve seen defaults of a number of financial institutions overseas and by now understand that similar things can happen in Australia as well. I sure wouldn’t like to see my money go when a bank goes bankrupt.

Let me draw a picture of the worst case scenario I was thinking about: I am saving up for a deposit, finally the 20% are in the bank, waiting for me to find the right house and sign a contract, I am going to the bank to get bank cheque prepared and they are telling me “Unfortunately we are experiencing cash problems, can you wait a couple of months?”.

So far I’ve described the problem – now it’s time to discuss a solution. Getting the money out of the bank is certainly not the way to go. Although for some types of bank accounts my worst case scenario is possible, there are other accounts that you can keep your money in and still sleep well at night.

Here is the deal – having seen financial institutions fail (in USA in particular), Australian government decided to protect us and from 12 October 2008 announced it will guarantee deposits in Australian owned banks, locally incorporated subsidiaries of foreign banks, credit unions and building societies for a period of three years. Any deposit under a threshold of 1 Million AUD is guaranteed with no extra fees involved, and for anything above that amount there is a fee.

The guarantee doesn’t cover all the accounts, so read carefully which ones are covered:

  • Separate mortgage offset accounts (with either 100% or partial offset) are covered.
  • However, home loan accounts with a redraw facility are not included

    Included are all standard deposit accounts, such as:

  • Transaction accounts
  • Online accounts
  • DIY deposit accounts
  • Term Deposits

However, Market linked investments such as Shares and Managed funds and life insurance are not included under the Government’s program because they are not considered by the Government to be eligible accounts.

And, of course, if you have any specific questions, it’s best to ask at your bank.

I’d like to ask you – did you think about this problem before? How safe do you think your money is in your bank? Have you ever considered your bank’s credit rating? Do you know what “credit rating” means?

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Section 32 – what the heck is it? (part 3)

by Chris Lang on November 2, 2008
Section 32 - what the heck is it? (part 3)

Building permit

All the building permits for the house issued 7 years back from the date of contract should be listed here. Also if the house was built by owner builder in the same period of time – a relevant permit should be attached. Why is that of interest to you? Because, for example, if you see a new pergola or a carport

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How to buy a house – Part 5

by Chris Lang on October 11, 2008
How to buy a house - Part 5

Once you’ve made your offer, it will be either accepted or rejected and it usually takes a couple of days to get the answer. If the offer is rejected you can try and submit a better offer on that house and see what happens. If the offer is accepted – congratulations, you’ve made some serious progress.

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What “Under offer” and “Under contract” means

by Chris Lang on September 20, 2008
What "Under offer" and "Under contract" means

The process of buying a house, like any other process, has several stages. Terms “Under offer” or “Under contract” are essentially the same, they indicate the status of the house through the selling process – note that they only apply to a private sale and never to an auction.

When a house is “Under offer” or “Under contract”

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