1. Buying a House vs Renting a House
The struggle for buying a house is always here: Should you buy a house or should you rent a house?
For most people, if you can afford it, you might eventually choose to buy a house.
That’s because it is a lifetime investment, and you probably want to live in the house you’ve spent all your money in and enjoy your lifetime investment.
For some people, they might have other investments which give them a better return than buying a house.
We’ve summarised a quick overview pros and cons of buying a house and renting a house below.
Buying a house – PROS
- CERTAINTY: As there is no risk of being evicted by a landlord
- SECURITY: You live in your own investment
- ENJOYMENT: You invest in your own house. You renovate your own property. You expand your own kingdom.
- EQUITY: As you pay off your loan, and as housing prices increase, your equity in your house increases
Buying a house – CONS
- INTEREST: You need to pay interest to the bank, although this might be a good thing, as you are using the leverage of other people’s money (the bank’s) to increase your own equity
- BURDEN: You might feel the heavy burden of having to repay the loan to your bank
Renting a house – PROS
- FLEXIBITY: It’s easy for you to move. Give your landlord sufficient notice (eg. A month)
- LESS REPAIRS: All capital repairs are done by the landlord. You simply ask the landlord to repair them for you.
- OPPORTUNITY: With more cash in hand, you have more opportunities to invest in other types of investments
Renting a house – CONS
- INSECURITY: Unless you have a long lease, the risk of being evicted by the landlord is always there
- LACK OF EQUITY: You are paying rent, and the landlord gets the equity (as people always say: why pay mortgage for someone else?)
2. What is your budget?
Know your budget before buying a house.
Look at your own financial situation, and set a target that you can afford.
Can you get a home loan? How much principal and interest do you have to repay each month?
What is your borrowing capacity? How much deposit do you need to pay yourself?
What are the costs when buying a house? For example, legal costs, registration costs, stamp duty. (Read further down for more details regarding this.)
Are there any government grants or concessions you can get? If you’re a first home buying, you might be eligible for the first home grant, or first home concession for stamp duty. Ask your lawyer ahead of time so you know what you’re expecting.
3. What are the costs?
Typically, the costs associated with buying a house will be the following:
- Conveyancing fees for your Conveyancing lawyer: around $1,500-$2,500 depending on how you spend on searches
- Title Registration Fees: around $1,500 – 3,000 (depends on your purchase price)
- Stamp Duty: $0 – $20,000 (depends on your situation and purchase price. Ask your conveyancing lawyer)
- Deposit: Ranging from 5% to 20% of your purchase price (this can vary a lot).
4. Do you need a loan pre-approval
For most people, having a loan pre-approval gives a much stronger sense of security. At least, you know your borrowing capacity and you can make a wiser decision when choosing which house you buy.
It is nice to have loan pre-approval from your bank, but it is not essential. Anyhow, we do suggest that you have pre-approval from your bank, if you’re able to obtain it.
But remember, one thing that is really important, your loan pre-approval is not equal to loan approval. After you’ve signed your contract, you still need to go through final approval with your bank.
If you have pre-approval from your bank, then the final approval is usually much more faster. Tell your Conveyancing Lawyer that you have pre-approval, and your Conveyancing Lawyer will make sure that your contract has a Finance condition in it.
5. What kind of house do you want?
It really all comes down to what you personally like.
Go inside the house, and you can usually ‘feel’ the moment, when the house inspires you to picture your dream home. Go into the bathroom, and see if you’re comfortable with it. Walk back out to the living room, and see whether the house envision you for furniture arrangement.
Check your neighbours to see if you’re in a zone that you’re happy with. Does the environment give you a ‘home’ feeling?
However, apart from your own preference, choosing a house at the right location is also very important.
Nowadays, school catchment is probably one of the most important reasons for mums and dads, when buying a house. And usually, if the property is in a good catchment, its value usually increases more easily.
Furthermore, do you want a house, or a townhouse with body corporate?
How many vehicles do you have and hence how many car parks do you need?
And if you want less gardening work, choose a house with a smaller garden, or lesser grass.
6. How to make an offer when buying a house?
There are several ways that you can make an offer when you’re buying a house.
One way is to directly negotiate with the seller through the real estate agent, and come to a mutually agreeable price. The agent should then fill in the contract for you and get both parties’ signatures.
Some agents require buyers to fill in an ‘expression of interest’ form with your offered price.
Alternatively, you can simply submit a signed contract with your offered price in it to the real estate agent, and wait for a counter-signature from the seller.
More cautious buyers will let their Conveyancing lawyer go through everything for them and even submit an offer through the lawyer. This is probably a slower way, but a more secure way to make sure that the contract is accurate and correct.
7. Have you found a Conveyancing Lawyer?
We always recommend that it is in your best interest to engage a Conveyancing Lawyer as early as possible.
Statistically, we find that the earlier a buyer appoint a lawyer, the lesser time the lawyer will spend in post-signature amendments to the contract.
When you’re at the stage of seeking bank pre-approval, it is probably about the right time to appoint a Conveyancing Lawyer. It never hurts to get legal advice earlier than later.
If you appoint a Conveyancing Lawyer before contract execution, your lawyer is able to discuss your concerns with you and insert any special conditions for you. Your lawyer can also check for any abnormalities in the contract.
If you’re looking to buy a house now, it’s probably a good time to seek legal advice now!
8. What conditions do you need in the Contract?
There are 2 conditions that are very common in a Queensland REIQ residential purchase contract.
The first one is Finance condition.
With a Finance condition in the contract, you’re saying that the contract will not become fully binding until and unless you have received written loan approval from your bank.
Even you have received a loan pre-approval, you should still put a Finance condition in your contract.
If you already have pre-approval from your bank, most banks will only take less than 7 days to complete the loan approval process. However, a Finance condition of 14 days is more preferable, as it gives your bank more time to process the loan application.
The second one is Building and Pest Inspection condition.
With this condition, your contract will be subject to your satisfaction of the building and pest status of the property.
We recommend that you allow at least 14 days to complete this. This will allow more time for yourself to appoint an inspection company to generate a report for you.
There are some other conditions which you can have in a contract, and you should speak to your Conveyancing Lawyer to explore these options.
9. Do you have to pay Stamp Duty?
When you buy a property, you are subject to Stamp Duty.
Stamp Duty is also known as a Transfer Duty, because it incurs when there is a transfer of property ownership.
The amount of Stamp Duty is dependent on the purchase price of the house.
However, if you’re a first home buyer, or if you will move into the house within the first 12 months of the purchase, you may be eligible for a “discount” of Stamp Duty.
If you’re a foreigner, in addition to the normal Stamp Duty, you may also be subject to an additional tax, called the AFAD – Additional Foreign Acquirer Duty.
Check out our Stamp Duty Calculator for an estimate of the Stamp Duty amount you should pay.
10. When do you buy insurance when buying a house?
You should buy insurance immediately upon you signing a contract to buy a house.
Yes, you should buy insurance even though the house has not settled and it is still in the seller’s name. This is called the “buyer’s risk”, meaning that once you’ve signed a contract, the house is at your risk as a buyer.
If you have an unconditional contract waiting to be settled, and the house got burned down, you might still be liable to complete the contract and buy the burned house. That is why insurance is extremely important.
Nowadays, buying insurance is simple. You can buy insurance online and they come into effect almost immediately.
You should insure the house, and also your house contents.
Talk to us
If you want us to give you a quotation for your conveyancing, please contact us or call us on 07 3344 2888.
Alternatively, you may email us at info@timeslawyers.com.au.
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