Finally found the house of your dreams? Congratulations! Whilst buying your first home can be exhilarating, you may find yourself in unfamiliar territory when dealing with both the financial and legal hurdles involved in purchasing your Castle.
Planning is crucial, and as the old adage goes – “planning makes perfect”. It is therefore highly important you have a fundamental understanding of the purchase process so that you can ensure the path to your first set of keys is as smooth as possible.
The Contract for Sale
You’ve found the house and you’re set to buy…. what’s next? Sign the Contract for Sale of course! Whilst it may seem like a simple signature, signing the Contract for Sale is a huge step forward in the purchase of your property. Signing the contract legally binds you to fulfilling a purchase of the property. It is therefore highly important that you read the contract carefully to make sure you fully understand what you are purchasing and at what price. You should also make sure you fully understand any special conditions that may be attached to the contract as they may prolong the time before you actually receive the keys to your new home, or if the purchase is subject to finance. If you find it difficult to understand the legalities of the contract, you should speak to a lawyer as soon as possible and they will be able to help explain your obligations.
The Form 1
Alongside signing the Contract for Sale, you will receive and be required to sign the Form 1. The Form 1 is a formal statement by the vendor about certain details relating to the property you are buying. The Form 1 is important because it highlights any anomalies that might affect the land (ie, easements, leases, Development Act items) as well as providing you a cooling-off period. A cooling-off period is a period of time, normally 48 hours, which commences on receipt of the Form 1. Once you are in receipt of the Form 1 and the Contract for Sale, you have 48 hours in which to exercise your cooling-off rights and legally terminate the contract without ramifications.
In the scenario where you have considered the Form 1 and determined that you do not wish to exercise your cooling-off rights, you will be required to pay a deposit. The deposit amount that needs to be paid will be specified in the Contract for Sale, and is usually 5% to 10% of the overall purchase price. A deposit will normally be required to be paid at the conclusion of the cooling-off period. It is important that you have the required funds ready for payment of the deposit. Failure to do so may place you in default of the contract.
So you’ve signed all purchase paperwork and you’ve now paid a fair chunk of your savings towards a deposit – time to jump on the mortgage bandwagon! A mortgage is the legal agreement used by a lender (ie, the bank) to lend you money at interest in exchange for taking your new home as security in the event of your default. Derived from the French word meaning “death pledge”, a mortgage is just that; a pledge to pay someone what they are owed. In this context, the pledge will be that within a certain timeframe (usually up to 30 years) you will pay back the lender the monies that you have borrowed to purchase your new home plus interest. If you don’t, the lender has the right (after certain processes are complied with) to take your property as their own to sell in satisfaction of the amount remaining on the loan.
It can be a slow process to organise a new loan, so you should act quickly and speak with your lender as soon as possible after signing the Contract for Sale. Many would recommend that you speak to your lender even before signing any contract so you can be sure your loan is approved in a timely manner, and you have an idea of what purchase price you can afford.
The First Home Owner Grant
As a first home owner, you may be eligible to claim the First Home Owner Grant (FHOG). The FHOG scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the State Government and is a one-off payment to first home owners who are purchasing a newly built home of less than $575,000.00 which has never previously been sold and occupied. The maximum grant payable under the scheme is $15,000.00 and will require you to live in the new home for at least 6 months within the first 12 months after purchase.
The finalisation of FHOG application can be slow, so you should get in quick to make sure the grant is available for you at settlement.
Contract and Form 1 signed ✓
Deposit paid ✓
Mortgage organised ✓
FHOG applied for ✓
You’re now ready to move in….well, almost!
Our second instalment of “Buying your first home” will cover what documents you need to have your new home transferred to your name, the settlement process and the final step, handover!
Georgiadis Lawyers are tried and tested in providing you with solid property and conveyancing advice. Feel free to contact us on (08) 8210 5400 to discuss your conveyancing matters. We offer fixed fees for all conveyancing services.
Blog post by Dimitri Panayotopoulos