With the rising costs of living, higher interest rates, and soaring inflation costs, we can all feel the financial pressure. We are carefully considering every expense and counting every penny as we navigate through the current climate and save money the best way we can. The same applies when purchasing a home. There are a number of things you can consider to help you save money both in the short and long run. In this article, we will delve into a few important factors to contemplate when making such a significant investment.

Choice of Lenders and Comparing Rates

Mortgage Brokers

The largest expense you are likely to incur is your mortgage, and with such a vast selection of lenders to choose from, it can easily feel like an overwhelming task to navigate. Mortgage brokers are a popular choice for purchasers to engage to assist them in finding the best rate and loan terms. Some mortgage brokers even offer cash rebates simply by choosing to obtain a loan through them. That could be cash back into your pocket that could be spent on new furniture you need, or even stocking your bare pantry once you move in.

Smaller Non-Bank Lenders

When it comes to choosing a particular lender, many people beeline for the major lenders that they are already familiar with. However, there are advantages to choosing a smaller non-bank lender if you have no loyalty or affinity to a major lender. This is due to often having more flexibility with loan approval requirement criteria, offering competitive rates and terms, and are often more customer-focused and attentive in order to build relationships.

Mortgage Rates and Fees

It’s also important to do your research and understand comparison rates and annual and monthly account-keeping fees. Comparison rates take into account both the interest rate and the associated fees, which provides you with a more accurate representation of the total cost of the loan. This allows you to compare different loan options more effectively and make an informed decision. On the other hand, account-keeping fees can vary greatly between lenders and can add up over time. It’s crucial to consider these fees when choosing a mortgage, as they can significantly affect the overall cost of the loan. By understanding and comparing comparison rates and account-keeping fees, you can ensure that you’re getting the best possible deal on your mortgage.

Depreciation Schedules (For Property Investors Only)

For investors, you can benefit greatly from understanding and utilising depreciation schedules. Depreciation schedules allow investors to claim tax deductions for the decline in value of their property over time. By claiming depreciation, investors can offset their rental income and reduce their tax liability. This can result in significant savings and increase the return on investment for property owners. Depreciation schedules are a valuable tool for property investors looking to maximise their profits and make their investment properties more financially advantageous. Contact a quantity surveyor specialising in depreciation schedules to find out more.

Building and Pest Inspections

By engaging a professional to complete a thorough building and pest inspection of the property before purchasing, you will be provided with a detailed report containing information on the overall state of the building and alerting you to any potential maintenance or repair requirements. Perhaps you are not looking for a fixer-upper and merely wanting to move into a home requiring no changes, the report may disclose major structural works in which you will need to arrange repair works, putting you off wanting to purchase the particular property altogether. The information obtained may be used to negotiate with the vendor prior to entering into the contract to complete some repair works prior to settlement, or you could negotiate a fair and lesser price if works will be required by you post-settlement. Obtaining a report allows you to make a more informed decision and plan your finances accordingly.

Avoid Properties That Form Part of Stratum Title Schemes, Company Share Schemes, or Have Been Converted from Commercial or Warehouse to Residential Properties

When searching for a property, homebuyers are faced with a multitude of property options, some of which contain factors that may impact your buying decision. In particular, it is essential to be cautious when it comes to properties that form part of stratum title schemes, company share schemes, or those that have been converted from commercial or warehouse spaces to residential units. While these properties may seem enticing at first glance, buyers should be aware that they may come with some inherent risks and pitfalls.

Properties that form part of stratum title schemes can present potential challenges and complications. Stratum title schemes involve multiple owners sharing ownership of a property, typically in high-rise buildings or complexes (stratum title schemes should not be confused with apartments, townhouses, and units affected by owners’ corporations). While this may allow for shared amenities and lower maintenance costs, it can also result in limited control over the property and increased administrative costs as stratum title schemes are an old form of title subdivision. Additionally, lenders may view stratum schemes as higher risk, leading to higher interest rates for loans secured against these properties. This can substantially impact your overall mortgage repayment and financial stability in the long run.

Similarly, company share schemes, where buyers purchase shares in a company that owns the property, can also be accompanied by their own set of disadvantages. In these schemes, ownership of the property is indirect, and the buyer only holds shares in the company. This means that the control and decision-making power pertaining to the property lie with the company’s directors. Additionally, lenders may hesitate to provide loans for properties under company share schemes due to the potential risks involved, resulting in higher interest rates or limited financing options. This can severely limit your ability to secure affordable financing and place undue financial strain on your budget.

Another factor to consider is properties that have been converted from commercial or warehouse to residential use. While the allure of living in a unique space with industrial or commercial charm may be tempting, there are certain drawbacks to be wary of. Conversion projects can often come with hidden structural or maintenance issues, as the original purpose of the building may not have been intended for residential living. These properties may lack the necessary infrastructure, insulation, or plumbing required for comfortable residential use. Moreover, lenders may view these converted properties as commercial in nature or higher in risk due to zoning or regulatory challenges, resulting in higher interest rates or difficulties in securing financing altogether.

Outgoings Applicable to a Property – Land Tax and Owners Corporation Fees

Most purchasers are familiar with the expectation to pay council fees and water rates, but there are a couple of other outgoings to be aware of. If the property is not going to be your Principal Place of Residency (PPR), you may incur Land Tax charges. Land tax is a tax levied by the State Revenue Office on the value of land that an individual owns, excluding their main residence. If the property in question is an investment property or a second home, the buyer will be responsible for paying land tax. The amount of land tax payable depends on the value of the land and can significantly impact the overall financial commitment involved in ongoing payments.

Another significant outgoing that buyers need to factor in is owners’ corporation (OC) fees. OC fees are payable for properties that are part of a strata or shared ownership arrangement. These fees are used to cover the cost of maintaining and managing common areas and any shared amenities within a building or complex. Buyers can protect themselves from unexpected outgoings by conducting thorough due diligence before entering into the contract. We recommend making inquiries with the relevant authorities, selling agent, and appointed conveyancer so you are not caught off guard and can budget for any extra costs.

Location, Location, Location

When purchasing a property, it is imperative to consider the location and how it can impact future costs. While the price of a property is undoubtedly important, it should not be the sole focus of your decision-making process. Instead, taking into account the location and its potential impact on your day-to-day life can not only save you money but can also save you time and impact your quality of day-to-day life. Consider the distance to public transportation, supermarkets, schools, or any such place you may need to travel to and from on a regular basis. By living in closer proximity to your child’s school or school bus service stops, for example, it doesn’t just mean less time in the car clenching the steering wheel whilst listening to the same ‘Let it go – Frozen’ song on repeat, it could mean saving money on petrol or longer periods between car maintenance services. Over time, saving on daily expenses can make quite a difference.

Obtain Insurance Quotes

Understanding how much a building will cost to insure is crucial in order to properly budget for the overall investment. One way to obtain this important information is by obtaining and comparing quotes for insurance prior to making the purchase. By obtaining a quote for insurance before purchasing a building, you can gain a better understanding of the potential insurance costs you may face. This information allows you to make an informed decision on whether you are willing and able to assume the financial obligation associated with the property. In some cases, particularly if the insurance quote is significantly high, potential buyers may choose to reconsider their purchasing decision or negotiate a lower price to offset the elevated insurance premiums.

Avoiding Properties with Flammable Cladding Issues or Building Disputes

When looking to purchase, it is crucial to steer clear of particular property issues to avoid potential legal and safety issues. One of the major concerns in Victoria’s real estate market is the presence of flammable cladding on buildings. Flammable cladding refers to external cladding materials that are not fire-resistant and can pose a significant risk in the event of a fire. Several high-profile incidents, both in Australia and internationally, have highlighted the unfortunate dangers associated with this issue, leading to stricter regulations and guidelines. Whilst for the best, if a property you are purchasing has cladding issues, special levies may be struck to complete rectification works, which you will be required to pay for your share. Building disputes with builders and developers are another aspect to be wary of when purchasing property. Disputes may arise between property developers and owners due to various reasons, such as poor workmanship, incomplete construction, or non-compliance with building codes and regulations. To avoid getting caught in such disputes, it is vital to conduct thorough research on the reputation of the builder and developer, and have the contract reviewed by a conveyancer in case any disputes have been disclosed.

Choose a Conveyancer with Fixed Fees

Before appointing a conveyancer, it’s important to first clarify whether the fees are fixed, meaning the cost is a set amount for the overall service and not billed by the time spent completing the works, and whether disbursements are included or extra. Disbursements refer to any administrative costs which are incurred during the conveyancing process, such as purchasing required certificates. You should obtain written quotes, which clearly outline what costs are and are not included, so you may compare them for the best deal. For example, at first glance, a fee of $900.00 in which disbursements are not included might look appealing initially when compared it with a fixed cost including disbursements which totals $1,500.00. However, you may later learn that the extra disbursements total an extra $700.00, you end up paying a greater amount. There is $100.00 in savings that could be better spent towards another important purchase requirement, such as engaging a building inspector as per our next point.

Whilst you may need to pay an initial cost for a service or dedicate more time than intended on completing research or obtaining quotes, implementing the above tips can be well worth the savings in the long and short term.

Ready to save on your next property purchase? Contact Provey for a fixed-fee quote and expert guidance tailored to your needs.

Leave a Comment