More ideas for home-buyers
Following on from last week's article, Common mistakes that home-buyers make, we bring you more pointers and pitfallsep
Tuesday, August 1st 2000, 12:00AM
by Paul McBeth
Following on from last week's article Common mistakes that home-buyers make , here are a few more ideas.
Lending staff at WestpacTrust say it's not so much the things that borrowers do wrong, but what they could get right (how diplomatic is that!). It all boils down to preparation, and their ideas include:
Talking to your lender
Before you even think about buying a house, go and see your lender to find out how much they'll lend you (this links back to last week's tip on getting your finance pre-approved). That means there are no surprises when you come to borrow, as they'll talk you through everything they take into account when assessing your borrowing ability and approving finance.
One example is overtime: WestpacTrust says that people sometimes add this to their base salary and assume that's the income they can borrow against. However, a borrower won't necessarily give you the full credit for all your overtime precisely because it's an amount that can vary. "It's a great disappointment to set your heart on a house and only then find you can't borrow the amount you thought."
Allow some slack
That's both in your finances and in your timing. The finance equation can get out of kilter when you're buying a new house and counting on getting a certain price from the sale of your existing property. If you get less than you expect, that means trouble if you've borrowed to the max.
The same goes with timing, as the later you leave it the more risk. Say the deal goes unconditional on a set date, you don't sort out your loan until the last minute and then the lender turns you down. The result: you haven't left enough time to find another source of borrowing.
Think about your loan structure
Spend some time sorting out the best type of loan for your circumstances and behaviour. For example, if your income is mostly commission and you're disciplined with debt, a revolving credit-type product may suit you. Think about floating rate loans versus fixed and capped rate loans: perhaps you can mix and match. Maybe you're paid fortnightly but you've only been making loan repayments monthly: you might be able to save some interest costs by making more frequent repayments.
The Jenman Group is an Australian-based education and training company which provides advice to home buyers and sellers. Here's a few mistakes home buyers can make from Neil Jenman:
Borrowing too much
"You may borrow too much based on your present situation. You must make allowance for changes in your circumstances in the future. Be especially careful of loans with payments which increase at a later date."
Being influenced by the market
"Do not be influenced by the market more than by your own situation. Waiting for prices to go up or down is to gamble with your family's future. If you find the home which feels good and you can afford it, you should rarely let market conditions become a major influencing factor."
Buying a "rogue home"
"Be careful you don't buy a rogue home because you overlook something obvious such as noisy neighbours or smells from factories. You should have at least two inspections at various times - Saturday evenings, early mornings (especially Sunday mornings) and during wet weather if possible. You should meet all the neighbours. Be suspicious of any home that has had several owners in a short period."
Instinct neglect
"Don't ignore your instincts. The right home has the right feel, just as the right person has the right feel. No-one should buy a home without having that feeling."