Big Mistakes
When making an offer to purchase a property where you need finance we are often scared of making a terrible and costly mistake. Here are the top 10 most common mistakes when purchasing property:
1) Making an unconditional offer before getting loan approval. Save yourself the grief and get your loan approved before making an unconditional offer – in writing! Alternatively insert a finance clause that allows you time to arrange your finance.
2) Signing up on a property that you have no intention of purchasing – this can open yourself to legal action and alienate yourself against professionals within the real estate industry.
3) Not having the sale & purchase agreement examined by a solicitor prior to signing OR not having a clause “subject to solicitors’ approval”. The solicitor is able to outline your obligations prior to you going unconditional so if you don’t do this and something comes up that you weren’t expecting this could affect the final result.
4) Purchasing a rental investment property without consulting an Accountant. There are many ways in which to maximise the benefits of purchasing a rental property but in order to take advantage of these benefits you need to know what to do before putting any pen to paper.
5) Interest Rate chasing. The cheapest interest rate is not always the cheapest loan. Generally most reputable lenders will offer pretty much the same interest rates – you need to match the term. Lender and product that BEST suits your needs.
6) If a lender declines the loan not trying other lenders. Not all lenders perceive risk to be the same. One lender may consider you a high risk while another no risk at all.
7) Forgetting about GST. For the purchase of some properties (eg commercial properties, rural land etc) some clients have overlooked that they have to pay GST. GST can only be claimed back once it has been paid and not all Lenders will offer to fund the GST for the interim. Make sure that the necessary arrangements have been put in place in plenty of time.
8) Underestimating building costs. Nearly every client who has undergone major renovations or the building of a new home has exceeded their building budget. Make sure that you have allowed for unexpected costs and overruns and where possible try and get a fixed building contract from your builder.
9) Not arranging adequate insurance by Unconditional date. If you can’t arrange house insurance on your property to be purchased the lender will not advance the loan. You are legally required to settle on a purchase when the contract goes unconditional so if you have not arranged adequate insurances you will still be required to settle on the new purchase.
10) Not getting a good Mortgage Advisor who is able to offer you sound and fully rounded advice that is tailored to your requirements and who can maximise the opportunities and minimise the chance of making a costly and painful mistake.
