Buying a home is a huge decision and a serious financial investment – and for most of us, it’s the most expensive purchase we’ll ever make. There’s a lot to think about, so it helps to have a checklist so you don’t forget anything important.
Here’s a handy guide to the things you’ll need to consider before buying a house in Australia.
The first step in buying a house is to save up the deposit. This is normally 10% of the total purchase price, but there are advantages in making your deposit a higher percentage: you’ll have lower mortgage repayments or may be able to afford a better property.
The home loan business in Australia is very competitive, so it pays to shop around. Making the right home loan choice can save you thousands of dollars over the life of your loan, so you need to get it right. Each home loan has its own sets of terms and conditions, so ask enough questions to fully understand the details of your mortgage. Is there a redraw facility? Can you pay out your loan early by making extra payments? It might take 2-5 years to save up a deposit to buy your house, so starting as early as possible will put you in a better position. Ideally, you’ll also start researching property prices and lenders at least a year before you buy. Can you pay fortnightly, monthly or weekly? Will you need mortgage insurance? When in doubt, find out.
It might take 2-5 years to save up a deposit to buy your house, so starting as early as possible will put you in a better position. Ideally, you’ll also start researching property prices and lenders at least a year before you buy.
The deposit is only the start of your upfront expenses. In addition, estimate an extra 5% of the total purchase price to cover other costs, including:
- Conveyancing or solicitor fees
- Disbursements or inquiries (title searches, etc.)
- Pest and property inspections
- Identification survey
- Strata records inspection (if relevant)
- Stamp duty on transfer of title / on mortgage
- Lender’s application fee
- Valuation fee
- Mortgage insurance (if required)
- Adjustment of council rates
- Home and Contents insurance
- Other expenses might include changing the locks, carpet cleaning, removalist fees, connection fees for various services and costs associated with any urgently needed repairs.
The neighbourhood you choose to live in will make a big different to how happy you are in your home. What are the local property values like? What about the burglary rates in that part of town? How close are the nearest shops, hospitals, restaurants, train stations or bus stops? Have you checked with the local council about any big developments planned for the area? Even though a house looks like it’s on ‘a quiet street’, it doesn’t hurt to check out what kind of neighbours you might be letting yourself in for. Do they have loud dogs, muffler-deficient motorcycles or teenagers with a tendency for throwing parties every Saturday night? Perhaps the house is surprisingly cheap because a massive 5-story apartment block is due for construction just behind your back yard!
In many areas, flooding and poor drainage can be a problem. A house on a slight slope and with a bit of elevation might be worth paying more for in some parts of town.
When buying a house, there are two well-known sayings worth remembering: (a) “Let the buyer beware” and (b) “Buy in haste, repent at leisure”. Choose your house carefully, and don’t rush the decision.
It helps to know if property prices are rising or falling in the area, so check pricing trends with the Real Estate Institute of Australia. New road construction or the proximity of factories, jails or sewerage works are obvious negative factors that you need to know about beforehand. When buying a house, there are two well-known sayings worth remembering: (a) “Let the buyer beware” and (b) “Buy in haste, repent at leisure”. Choose your house carefully, and don’t rush the decision. If there are sportsgrounds, bars, train stations or other noise sources nearby, that may affect your decision too.
On the plus side, does the house have a good view, access to a nice breeze in summer, some nearby parks or walking tracks, handy recreational facilities or a well-kept garden? If it’s close to your workplace you can save quite a lot of money on transport costs over time, so factor this into the equation too.
School for the Kids
If you have children, distance to decent schools is also an important consideration. How close are they and how will your children get there and back? Is public transport readily available? Is there a train station or bus stop nearby? If children are walking to and from school, is the route safe? If they’re getting to school by bicycle, are there bike paths?
It’s easy enough to get onto a school’s website to check them out in advance. If your child is involved in a particular sport, musical discipline or other activity, will the new school have programs in place to support this? If you’re a parent looking to purchase a house in a new area, it’s worth doing some research into available schools within a reasonable distance of your new home.
In Australia, we like to drive. Only about 1 in 10 of us regularly use public transport to get to and from work1, but having buses and trains available near a new home can be useful: you may find it lets you get rid of one of your two cars, or saves you driving the kids to school, or make it easier to access the CBD.
With trains, the ideal is a station that’s close enough to conveniently walk to, but not so close that your house is subject to endless train noise. And for some people, walking from home to a train station or bus stop is a less stressful way to commute than sitting in traffic in their own car.
A title search provides a potential house buyer with an official record of a property’s ownership history. It ensures the seller has the legal right to sell the property and that no liens or encumbrances exist that might prevent you from purchasing the property. Each state and territory has its own requirements and methods regarding title searches, so check what is required where you live. Your conveyancer can advise you about title checks.
As a Long Term Investment
Because of the current housing shortage in Australia, real estate represents a pretty good investment. If you are buying a house with the idea of renting it out you may be able to generate a reliable income stream or create tax savings through negative gearing.
However, you need to know what you’re doing. Ongoing maintenance costs, bad tenants and other issues can consume your time and money, so you need to make the same sensible decisions in purchasing an investment property as you do when selecting a house to live in yourself. Having a competent, professional property manager to deal with the month-to-month details as well as a qualified accountant can also help a lot. You can purchase specific insurance cover as a landlord to help protect your investment against incidents such as if tenants cause malicious damage or skip out without paying their rent.
Home and Contents Insurance
It’s a sad fact that many Australians are underinsured and this often comes back to bite them when their home is affected by storm damage, a bushfire, a leaky pipe that floods the house, a burglary incident, vandalism or some other unforeseen calamity.
According to the Australian Bureau of Statistics, around 1.8 million Aussie homesThere’s really no excuse for not having adequate home and contents insurance these days, because the industry is more competitive than ever. Read the Product Disclosure Statement before you purchase and make sure you understand exactly what your policy covers. (about 23% of all households) have no home and contents insurance2, which is astounding when you consider that the average value of household contents in Aussie homes exceeds $60,0003.
There’s really no excuse for not having adequate home and contents insurance these days, because the industry is more competitive than ever. Read the Product Disclosure Statement before you purchase and make sure you understand exactly what your policy covers.
Before you buy a house, have a thorough building inspection performed by a licensed and insured professional. Keep in mind that a building inspection report is different from a pest inspection report (although some companies can perform both for you). A building inspection will cost you a few hundred dollars but is worth its weight in gold. Here’s why:
The last thing you want is to be buying a house with major structural issues. Aside from the safety risk to those living in the house, you could be up for huge repair bills. An inspector will look at the building’s structural integrity and check for rising damp, sagging walls, faulty roofing, water damage, etc.
Identifying safety issues
We all want a safe home, and an inspection will look for any obvious safety issues including the presence of asbestos, cracks in walls, loose balustrades and anything else that might pose a hazard to the occupants.
Budgeting for repairs
Real estate people love the term ‘fixer-upper’, but how much are all those repairs going to cost you? A proper inspection can help you determine what’s needed in the way of future repairs or replacements so you can better estimate the total cost.
Sheds, patios and other structures
Building inspectors also check things like garden sheds, pergolas and patios. If the previous owner built these without proper council approval, they might need to be torn down.
Aside from letting you know about potential problems with a home, a building inspection can be used as a bargaining chip in trimming the asking price. For example, if the inspection shows you’ll need to perform considerable repairs, you may be able to negotiate a lower price for the property.
Aside from organising a professional inspection, you should always make your own personal inspection of a property. Check for damp or mould, and look for new-looking patches of paint that may have been used to cover up a defect. Open and close all windows and doors to make sure they don’t ‘stick’. Flush the toilet to see that it functions properly and check all bathroom, laundry and kitchen taps to see how long the hot water takes to make an appearance. Never buy a house ‘sight unseen’. Check for damp or mould, and look for new-looking patches of paint that may have been used to cover up a defect. Open and close all windows and doors to make sure they don’t ‘stick’.
Flush the toilet to see that it functions properly and check all bathroom, laundry and kitchen taps to see how long the hot water takes to make an appearance. Check under sinks for rusty pipes or loose fittings. Check light switches and inspect the fuse box – is there a safety switch? Outdoors, check the gutters, downpipes, exterior walls and overall condition of the roof. Evaluate the property’s drainage.
Pest Control Inspection
In addition to a professional building inspection, you should also have your prospective new home inspected for pests (especially termites) prior to purchase. Use a licensed pest control company. While there are some obvious signs of termite activity that you might be able to spot yourself (termite nests in trees near the house, blistering or bulging paint, rotten and half-eaten fence posts), the only way to be absolutely sure is with a professional inspection. A house can look fine at first glance but still be riddled with termites, which eat a home from the inside out and are exceptionally good at concealing evidence of their activity. A house can look fine at first glance but still be riddled with termites, which eat a home from the inside out and are exceptionally good at concealing evidence of their activity.
A pest control inspector will look for other pest issues too: ants, wasps, mice, spiders, clothes moths, cockroaches, etc. These are the sorts of things you definitely want to know about before you buy a house!
One thing that home buyers might forget to check is whether all of the home’s built-in appliances work properly. This includes the hot water system, stovetop, oven, air conditioning, central heating system, etc. Just because a house ‘comes with’ certain appliances doesn’t necessarily mean they all work correctly. If the house is equipped with an alarm system, ceiling fans, an intercom system or electric garage doors, you should know whether these are functional before you buy the house.