In a perfect world you select a property to buy, complete with white picket fence, and the settlement goes through on the agreed date without a hitch. But as we all know, we don’t live in a perfect world.
When you buy or sell a property you go through a ‘settlement period’, which is the time designated for the buyer to complete payment of the contract before becoming the owner of the home.
Up until the settlement goes through the home is the property of the existing owner.
And with a large home deposit at stake, you’ll want to ensure you choose the right period length.
How much time should I give myself?
Generally, settlement periods are 30, 42, 60 or 90 days.
In NSW a 42 day settlement period is the most common, but in most other places around the country it’s 60 days.
Just because it’s common, however, doesn’t mean it’s the best fit for your situation (or the seller’s).
You see, both the buyer and the seller must agree on the settlement period.
However, you may have competing motivations, so this can be tricky.
Whatever the case, just make sure you allow yourself enough time for conveyancing, bank financing approval, organising the move, undertaking requested repairs for the buyer, and negotiating settlements for your other property interests.
Also, keep in mind that if you buy the property at an auction, there will already be a settlement date indicated in the contract.
If you can’t meet that date, chat to the selling agent before signing on the dotted line to see if another date is agreeable.
You might push for a longer settlement period if:
– If you’re the seller and you’re still looking for a property to purchase
– If you’re a buyer and you haven’t yet sold your own home
– You’re selling and the buyer has requested you repair something
– If you have an upcoming event that you want to deal with first (wedding, big overseas trip, etc)
– Someone is going guarantor on the loan or you’re purchasing through a family trust
– You’re buying off the plan, as the scheme has to be registered with the titles office
– You need to save more money as a buffer (especially if you’re upgrading or will be renovating).
You might push for a shorter settlement period when:
– You’re a seller who has already found another home
– You’re a buyer who has already sold your current home and needs to move quickly
– A holiday period or big event is coming up and you’re keen to move in beforehand
– You’d like to undertake work on the property sooner rather than later
– You need cash flow.
It’s important to get right
One-in-five property settlements in Australia are delayed by about one week so it’s important to give yourself a comfortable buffer.
While each party can request a settlement extension if a delay occurs, that doesn’t mean the other party has to agree.
This is where it gets a little tricky. Each state and territory has different laws, and every contract differs.
Queensland’s laws are probably the most stringent. For example, either the buyer or the seller can terminate the contract, sue for damages, and keep/lose their deposit if the other party is not ready to buy on time.
Other states have a little bit more leeway.
In NSW and Tasmania an extra 14 days can be given, in WA and SA buyers are given three days’ grace before penalty interest applies, and in Victoria a seller can immediately start charging a tardy buyer penalty interest.
So that’s negotiating a settlement period in a nutshell.
The best news? That’s about as much negotiating as you’ll need to do. Because when it comes to negotiating a loan with a lender, we’ve got you covered.
If you’d like to find out more about our services, get in touch, we’d love to help you out.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.By Dave Fleming : 22 January, 2019
So, are you looking to buy your first home?
This can be a major step for anybody, and you will find quite a few things to consider, not the very least of these is the way to get the funds for a house. Sure, there are lending options readily available for property purchases; however you will need to have some money on hand to pay for a deposit, also there are other costs, which include fees and settlement costs that you may not be able to get included in a borrowing arrangement.
How Much Money do You Have to Start?
If you’re like a lot of first home buyers who are looking to purchase using a low deposit home loan you will still need to do your sums to calculate how much cash you will need. Most lenders who provide low deposit home loans want to see that you have at least 5% in genuine savings. What does this mean? It means you will be able to demonstrate that you have saved 5% of the purchase price over a 3 month period. Or, you have had that amount of funds in a savings account in your name for at least 3 months.
Basically they want to know if you have fiscal discipline and a sense of responsibility. In addition, if you’re buying an established property you will also have to prove to them that you have enough additional funds to complete the purchase transaction. This means you will need enough extra cash to pay for purchase stamp duty and legal costs.
Are You Eligible for Government Concessions?
If you’re purchasing a new home that nobody’s ever lived in before you might be eligible for first home buyer concessions. If you fit into that category you should check with your local states Office of State Revenue for any programs they may have.
So, what are some methods the everyday Australian can use to get hold of some funds to cover the dollar amounts required to purchase a home?
Cash Generating Tips
If you are planning to get a property inside of 12 months you will want a savings strategy that’s going to yield immediate results. Saving cash is usually a complicated challenge if you only have a preset amount of disposable income on a month to month basis. A Second employment opportunity could be a possible option for generating fast savings.
Investigating other cash flow scenarios including a cash value insurance policy might help put some cash together. However, be mindful that withdrawal penalties could be applied, nonetheless it may be well worth the expense to get your first home.
Additional ways to pull together cash include things like selling off valuable items on the net or with a garage sale. Spare cars, stocks and shares, collectables, along with other things that have got a good value can easily generate big returns.
Some lenders will allow a gift from the borrowers parents as long as the parents are prepared to put in writing that the money is a gift and non-refundable.
Longer Range Planning Strategies
Should you be concentrating on a long range strategy you naturally will have much more time to accumulate the required funds. Investing more money into a term deposit or perhaps a cash value insurance plan may help keep hold of the funds for your new home.
Starting a savings bank account can certainly help ensure that the financial resources are readily available and generating interest along the way.
An additional second job would still be another possibility, but if you have the luxury of much more time to save you would then have the luxury of having to work a lesser number of hours.
Starting a home based business would provide a flexible alternative for generating extra cash flow. Nevertheless, choose wisely in finding a business enterprise that is both rewarding and legit.
Tithing is an Oldie but a Goodie
It takes a smart person to make money, however it takes an even smarter person to hang onto it. In today’s society most people are so busy paying everyone else, there is never any money left over to pay themselves. To reverse this habit a person needs to sit down and map out a budget of their expenses. Once that has been done, whittle those expenses down until there is a cash surplus left over each month.
A worthy goal is to aim at saving a minimum of 10% of your net income each month. In other words, before you pay anyone else you pay yourself 10% right off the top. Then, you figure out how to manage your lifestyle so you can live on the 90% that is left over.
The purchase of a home is a sizable, but very worthwhile step, create a workable plan for getting the money together that you need and then stick to the plan through thick and thin.
About About Dave Fleming
Dave is enthusiastic and fascinated by the digital and social media worlds. He is passionate and enjoys entrepreneurial pursuits, wealth creation financial strategies, health, fitness as well as cooking. Dave is the webmaster at www.mastermortgagebrokersydney.com.au, which is an information website pertaining to loans. He has a deep commitment towards writing about and helping people understand the basics of how the financial world works.
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