Multi-Choice Home Loans : Things you should know
Purchasing - the Process from Contract to Settlement
If only for peace of mind, it is imperative that you gain an understanding of the purchase process. Please note that conveyancing detail does differ between states. Nevertheless, here is a general description of the process which will certainly be of assistance even if it only helps you to ask the right questions of your legal advisor, real estate agent or your Multi-Choice Consultant.
Before continuing, the most important point to note is that you should always seek professional advice before committing yourself to legal and financial obligations.
- Before signing the purchase contract, see your solicitor or legal advisor.
- Before shopping for that home, have your loan pre-approved which will serve to enhance your confidence and possibly reduce the purchase price. So call our office today for an obligation free, no cost pre-approved loan that will help you take the next step.
Overview of a Standard REIQ Contract from "signing" to settlement
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Stage I - No Purchase contract in Place
Prior to house hunting it is advisable to make application via Multi-Choice with the lender of your choice. Have your loan approved for either a specific sum or alternatively a maximum lend. Don't forget that the maximum loan offered by lenders differs vastly from one bank to another. A Multi-Choice consultant can very simply show you maximum limits offered by different lenders so please contact us today to put yourself in a strong position for your property purchase. A pre-approved loan won't cost you a cent and you will get the benefit of some personal help from us.
Stage II - A Conditional Contract
Once you have signed the purchase contract you must send a fax copy of the contract to your Multi-Choice consultant ASAP. That way there will be no time wasted in ordering bank valuations, if required, which can take up to five working days if the valuer is delayed. Waiting on unconditional finance approval with the deadline looming is no fun for anyone!
Remember that a pre-approval certificate is still no guarantee, it is subject to the property being suitable as security for the loan (which is normally not an issue if the property is in a major metropolitan area).
The contract as depicted is conditional upon a 14 day finance clause and a 7 day building and pest inspection clause. This means that you need to have those conditions met to your satisfaction, or as stated by your contract, prior to letting the vendor know that all is fine and you will proceed with the purchase. Please be sure to refer to your solicitor and also ensure that you communicate with your solicitor. Don't forget to arrange an insurance cover note on the property being purchased from the moment it is accepted by the vendor.
Stage III - An Unconditional Contract
Once you have met all your conditions of purchase you can then proceed to state 3, the "point of no return". ie the point at which the contract is unconditional. At that point the vendor usually will expect a large enough deposit that clearly evidences your intention to settle. Should you fail to settle as per the contract terms, you will be in breach of contract and the vendor may expect you to forfeit your deposit - in other words the deposit is "hurt money". The vendor is also entitled to pursue it further. Therefore make certain you communicate with your solicitor through this process and also with your Multi-Choice consultant.
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The Flow of Funds - Who pays who?
Assume a purchase price of $300 000 and a loan of 95% of the purchase value. Loan = $285 000.
The initial deposit on contract signing assume to be $500 and upon finance approval within 14 days you need to pay the balance of deposit of $11 500. Total deposit paid = $12 000.
Here is a simple flow chart depicting the common flow of funds for the purchase of your home.
| Steps: |
1. |
Initial deposit paid to agent |
$500.00 |
| |
2. |
Upon finance approval, balance of deposit paid
to agent |
$11 500.00 |
| |
3. |
On settlement day, bank pays vendor |
$285 000.00 |
| |
3. |
Buyer pays the difference on settlement
to vendor |
$3 000.00 |
| |
|
Sale Price |
$300 000.00 |
The vendor receives the sale price less the commission charged by the agent. The agent's commission is taken from the deposit funds paid to the agents trust account. Please note that this is a simplified model of a real life situation. The bank normally takes out government stamp duties and search fees and will also deduct its own fees, if any, from the proceeds of the loan at settlement. Your solicitor or legal representative will confer with the bank's solicitors prior to settlement to finalise the amount of funds to be available at settlement. Then you will be informed by your solicitor as to the exact amount required for settlement.
Remember, with a friendly and experienced Multi-Choice consultant on your side it will be simple.
Talk to a Multi-Choice Consultant today on 1300 36 36 99
Construction Loans
If you are thinking of building a new home then here are a few helpful tips to assist you in understanding the financing process. The overview provided is not comprehensive and is intended only as a guide.
If these tips only help you to ask the right questions of the builder, developers or lenders it would have been a worthwhile exercise. Please refer to Multi-Choice for further assistance.
Developers may offer two different packages
| Package 1 |
The house of your choice is built on the developer's land which you purchase and finance once construction is complete. The developers will generally insist on non-refundable deposit for you to secure the purchase and construction. No progress payments or further monies are expected from you until the construction is complete. At that point you complete the purchase by making the necessary arrangements with your lenders to pay the balance of funds to the developer.
Advantages:
The developers will complete the project without delay to save on any interest charges to fund the project. I.e. on his funds borrowed on the land purchase and the construction costs.
 |
The risk of default by a private builder is minimised |
|
You don't pay interest on funds borrowed since the loan is not in place until you take possession. An attractive thought if you are unable to afford the loan repayments plus existing rent. | |
| Package 2 |
You choose the land you want and purchase it from the developer. You might need a 5% or 10% deposit depending on how you present the loan application to the lender. Please consult one of our friendly consultants of Multi-Choice for some assistance. The balance of the land's value is to be paid upon settlement, after which the builders can commence construction.
The difference here is that you take ownership of the land prior to construction. That means you will pay stamp duty on the land to take transfer and will probably need a "land loan" unless you have sufficient equity in a property that you have sold. Importantly, only once you have taken ownership of the land will the lenders be prepared to release approved funds for construction. Simply, there is no sense building on someone else's land! What if transfer never takes place? The lenders will have no security property to rely on and have no legal recourse.
During the course of construction the builder normally insists on progress payments. These payments are made at various stages of the construction e.g. slab down, framework erected, roof complete, flooring and tiling complete and lock-up.
Advantages:
|
You will generally have more choice in the design of the home. |
|
You have more control in the finish and standard of workmanship since payment is made only if you are happy. |
|
Stamp duty costs may be lower since you only pay transfer fees on the land component. | |
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Bridging Finance
These loans allow a borrower to bridge the time gap between the sale of their home and the purchase of another. Particularly useful if the purchase property has to settle prior to the sale of the existing home. Lenders qualify your maximum borrowings based on the final debt after sale, whilst taking into account interest charges that will occur on the whole debt for six to twelve months. This can be an expensive form of financing and it is imperative you talk to one of our consultants to confirm suitability.
Consolidate your Loans into 1 and Save!
Client saves $845 off monthly payments
Here is an example of a common financial situation for the average Australian family.
| |
Loan |
Debt |
Current Repayment per month |
|
1. |
Home Loan |
$145 000.00 |
$985.00 @ 6.57% pa over 25 years |
|
2. |
Car Loan |
$18 000.00 |
$410.00 @ 13% pa over 5 years |
|
3. |
Renovation Loan |
$10 000.00 |
$208.00 @ 9.0% pa over 5 years |
|
4. |
Credit Card(1) |
$ 7 000.00 |
$210.00 at minimum payment required |
|
5. |
Credit Card(2) |
$ 5 000.00 |
$150.00 at minimum payment required |
|
|
|
$185 000.00 |
Minimum $ 1963.00 per month |
Consolidate and refinance to a better interest rate
Only one Loan = $185 000.00 (@ 6.07% pa over 30 years)
Repayments Now = $1118 per month, that is a reduction of $845.00 per month
To arrange a FREE assessment, call 1300 36 36 99
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