How to make settling
your home unit purchase smoother
Buying a home unit is very exciting and very stressful at
the same time.
Is there something you can be doing which helps when you
are counting down the days before you pay the price and
receive the keys?
Yes - there are 6 jobs you can be doing to de-stress the
process and make settlement smoother:
Job #1 Make sure your
lender has all their requirements - Dont leave it to
the last minute. Some loan approvals have extra
requirements. All loan approvals require a loan contract and
a mortgage to be signed as much as 10 days before settlement
is due. If you are late, you cannot blame the lender if you
must pay penalty interest of 10% pa under the Contract for
late settlement.
Job #2 Make sure you have
enough money to settle Money has a habit of
disappearing into extra expenses the closer you get to
settlement. The largest expense is stamp duty, which must be
paid on settlement, unless it is an off the plan purchase
where it is payable earlier - 15 months after the Contract
Date. First Home Buyers are eligible for a Grant of $10,000
towards the stamp duty, if it is a new home unit and the
price is no more than $750,000. The next largest expense is
the loan expenses, which are deducted from the loan advance.
Lenders Mortgage Insurance (LMI) is a large expense if the
loan is more than 80% of the price. Then there are legal
fees, plus the cost of searches and enquiries and settlement
costs. Finally, allow about $500 to cover rates adjustments
Job #3 Inspect the home
unit before you settle If you notice any damage to
the carpets, the floating floor, the tiles, the doors, the
built-ins, etc that was not there when you first inspected
the property. Check that the lights, the stove, the range
hood, the dishwasher and the hot water system are working
properly. Inspect even if the home unit is tenanted, because
you lose all rights to complain once you have settled,
unless it is an off the plan purchase where a 3 month
defects warranty applies to cover non-cosmetic defects. If
the property is sold vacant, check that all the old
furniture and junk have been removed from the garage!
Job #4 If tenanted
Check with the managing agent that the rent is up to date.
If the lease is an expired lease, ask the managing agent to
have the tenants sign a new lease to commence when you
settle the purchase. The managing agent looks after the
transfer of the rental bond and the rental adjustment.
Job #5 Notifying the
authorities - If buying to live in, it is your
responsibility to connect electricity, gas, and telecom.
Your solicitor / conveyancer will notify the Local Council,
the Water Board and the Strata Manager of your purchase and
your mailing address. Your lender looks after the transfer
of title.
Job #6 Keep records of
your purchase Capital Gains Tax is not going to go
away. This means that you need to keep records of your
purchase which includes stamp duty and other expenses
paid, to establish a cost base to calculate your capital
gain. You keep these records until you sell. This advice
applies even if you are going to live in the home unit,
because you will be paying capital gains tax if you move out
down the track into a new home and keep the home unit as an
investment.
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