Financial pitfalls to beware of when purchasing property
Purchasing property, whether as an owner-occupier or for investment purposes, can make a fantastic financial asset for any Australian.
Of course, buying property is a huge financial investment though, which is why it is extremely important to be proactive in avoiding some of the costly mistakes that are often associated with purchasing property.
To help borrowers stay on the right track, here are three financial pitfalls to consider when purchasing property.
Failure to complete proper pest and building inspections
One of the biggest mistakes a home buyer can make is not getting the proper pest and building inspections done before buying a home. Without the proper inspections, you are at risk of finding out you’ve bought a lemon after it is much too late!
With so much competition for property, it’s not unsurprising that an increasing number of potential buyers are failing to get the necessary inspections done before purchasing. Given that comprehensive pest and building inspections can cost a significant amount of money, many potential buyers choose to forego them altogether, as they are concerned they will end up spending a fortune completing inspections on properties that they don’t win at auction (which in this current market could be anywhere between 5 and 10 properties in total).
That said, some real estate agencies offer pest and building reports at a discounted price, so it could be worth while making enquiries to help alleviate some of the financial burden associated with getting pest and building inspections.
Buying an off the plan property in a bad market
Another property pitfall affecting some buyers at the moment are the changes to investment lending policy. Over the last few months, many of Australia’s lenders have made sweeping changes to their lending policies. While the vast majority of policy changes have been targeted at investors, there have been some more general changes made which apply to all buyers. These changes include (but aren’t limited to) modifications to servicing criteria as well as loan to value ratio (LVR) restrictions and interest rate increases.
As such, investors and home buyers who are in the process of purchasing off the plan properties may find that while they received a pre-approval from their lender when they started the process, that lender has recently changed their lending policy and will no longer be able to approve the loan because they have reduced their maximum LVR. While this issue certainly won’t affect all buyers purchasing off the plan, those going through the process should consult their lending professional.
Low property valuation
It is not uncommon to hear about property valuations coming in lower than expected at the moment. The reality is, the market is going through some ups and downs and property valuers are, understandably, cautious. When valuations come in lower than expected, property buyers need to be able to stump up more money from their own hip pocket to complete the purchase, which can cause problems.
For more tips on how you can avoid some of the financial pitfalls associated with purchasing property, contact us on 0448 010 501