in your best interests
It sounds easy enough, but there are a number of different ways to purchase property in New Zealand. Brian, The Wellington Mortgage Broker, highlights the options and key points to remember with each.
Buying at auction can be pretty exciting, and daunting at the same time. If you’re new to property buying it makes sense to go along to a few beforehand just to see how they work and what to expect.
If you are successful at auction (ie your bid was the highest) then your offer is considered unconditional – which basically means you are buying the house! For obvious reasons you need to have all your ducks in a row before you go to auction. After you win is not the time to start looking for finance!
As part of your pre-auction package the real estate agent will give you a copy of the Sale & Purchase (S&P) agreement, title and possibly a LIM (Land Information Memorandum) report as well. You may also want to consider having a valuation and building inspection completed prior to the auction as well for your own peace of mind.
As you imagine the ‘due diligence’ work done before an auction can be quite expensive, so it pays not to go nuts and bid for loads of properties. Take your time, choose wisely and go after the ones you are really serious about only.
Before you turn up to the auction you’ll need to register your interest with the agent. As a 10% deposit is generally due on the day (if successful) you’ll also need to ensure you have funds available to cover this cost.
6 Auction Steps You Need To Cover
Tenders can be restricted to unconditional offers (which will attract fewer offers) or open to all offers (including conditional offers). You submit a written offer (through the agent) of how much you’d be willing to pay for the property, along with any conditions of the purchase (such as ‘subject to finance’ etc) if applicable. The vendor then considers all the offers they received by the date specified, and decide which they are happiest with.
It is a pretty nerve-wracking process as you have no idea what the other offers are. For this reason it makes sense to try and glean as much info from the agent as you can to give yourself the best possible chance.
This is a purchase by negotiation where you enter conditions into the Sale & Purchase (S&P) agreement.
With a Private Sale you will be negotiating directly with the vendor (seller) rather than communicating through a real estate agent. You’ll need to get a registered valuation completed as part of the finance approval, and it makes sense to have your solicitor check through the agreement before you sign anything. As you don’t have an agent involved in the process there is an increased chance that something will go wrong as no one is there to spot potential issues – so it pays to employ a legal expert early in the process to help guide you.
Sale & Purchase (S&P) Agreement
Upon finding the property you’re keen to purchase a Sale & Purchase (S&P) agreement will need to be completed and signed. This agreement outlines all the conditions of the sale and allows you to enter any specific conditions you may have or wish to be part of the sale. Some of the main conditions you may wish to use are as follows:
You may also wish to include a ‘due diligence’ clause to ensure you have greater control of the process. This can be a useful clause to include as it gives you an ‘out’ should you need one. Buyers like this clause, agents not so much...
Along with the conditions of sale the ‘Sale & Purchase’ agreement will also clearly state the finance date and the settlement date.
The finance date is the day you need to have your finance in place by (fully approved), and the settlement date the date of possession (when the loans are drawn, keys are picked up and the property is yours!)
The deposit is normally paid when you go unconditional on a property (so on the day of the auction if successful).
Here are a few guidelines for paying deposits:
What is a LIM report?
Land Information Memorandum Report – provided (for a fee) by the local authority or at times by the seller of the property. It shows details on a property such as plumbing, drainage, water reticulation plans, consents, licences and permits, etc. It is important to check with the seller of the property for details of other work that may have been carried out without notification to the local authority as this may not be included in the LIM report.
You can expect to pay around $300-350 for the report. Given the time it takes to receive it’s best to order this asap once the S&P has been signed.
No matter which method you use to purchase your property it pays to do so with as much understanding and knowledge as you can. Ensuring you have a great team there to help you can make the difference between a simple transaction, and a potential nightmare. Contact us today and let us guide you to your next purchase.
a mortgage can be the biggest expense you will ever incur. use these tips to slash years off and save yourself thousands
Focus on Big Wins
There will be people who tell you to cut back on coffees, don’t have that after work beer, no chocolate at lunchtime etc etc. All great advice – but no one is ever going to maintain these ideas as it involves will power (which is a very scarce commodity!). Rather than beating yourself up by failing at these why not spend 1hr per year and focus on some big wins. Find out how to save hundreds of dollars with just a couple of phone calls here.
Make Extra Loan Payments
Making regular or periodic extra repayments such as tax refunds, work bonuses etc help reduce the principal on your mortgage that bit quicker. The earlier you begin making these additional payments, the greater the benefit you will see, as you will both shorten the loan term and pay less interest.
Make extra repayments right from the start
Regular additional repayments made right from the beginning of your loan term will have a much greater effect on the overall time and cost of your loan than starting five or ten years into the loan. Even if you are already more than five years into your loan term, you can still make a considerable saving by starting to make additional repayments now.
A Great Rate with Flexibility
The simplest way to repay your loan faster is to secure a lower rate than the one you are currently on, but maintain (or even increase) the repayment amount. Keep an eye out for a loan with a low rate that offers the flexibility to make extra payments. There are a number of lenders whose rates differ significantly from the major banks’ rates that still offer flexibility, but if you are going to refinance, make sure the costs incurred don’t outweigh the benefits you may receive.
Make settlement date your first repayment date
Rather than waiting a month to make your first repayment (as is the norm) try making your first repayment on your settlement date. This reduces the principal before the first lot of interest accrues.
Pay Any Set Up Fees Up Front
If you can avoid capitalising any upfront costs (such as legal costs, Low Equity Fess etc) this could potentially save your thousands of dollars in interest over the lifetime of the loan.
By cutting expenditure on the non-essentials each month and redirecting the money saved into your home loan you can knock years of the loan term. Smoking, an after-work beer, morning coffee and that afternoon chocolate fix all add up over time. Add to that buying at least one lunch, breakfast or dinner less a week and you could be putting more than $50 extra a week into your mortgage. This is only for people who possess will power!...
Look Beyond the Big banks
The big banks aren’t always the best places to borrow money. Many smaller banks and specialist lenders offer very competitive loans. Just because you haven’t heard of a lender doesn’t mean they aren’t reputable – we can let you know which lenders are credible and appropriate for your needs.
Increase Your Repayment Frequency
If your loan repayment is calculated on a monthly basis, you can make great savings by cutting your monthly repayments in half and paying fortnightly instead. This will result in you paying an extra month’s repayment on your mortgage over the year, helping reduce the principal that bit quicker. You can use this loan repayment calculator to find out the difference in loan repayment amounts.
Check the fine print in your loan documents to ensure your lender has not calculated your fortnightly repayments to equal half what the monthly repayment would have been, as this will not save you in time or money. Use the extra repayments calculator to get an idea of how much you could save with different payment amounts.
Offset and Revolving Credit Facilities
Loans with offset facilities allow you to have your salary paid directly into the offset account which reduces the interest you pay on your home loan. The balance of the account is ‘offset’ against the balance of the loan for interest calculations and because you pay interest daily, this can save you a lot of money over the long term.
Keep Repayments The Same When Interest Rates Fall
When interest rates are falling, it is tempting to pay less and spend the difference. However, if you keep your repayments at the old level you will cut a significant portion of principle off your loan.
Combine for more saving power
Try at least two of the above tips in conjunction to really ramp up your savings.
Brian MacLean looks into tips, ideas and strategies you can use to get ahead financially..