How property finance works

How property finance works

If you’re thinking of investing in real estate, upsizing / downsizing or planning a move to a new location, you’ve probably started looking at the real estate prices. So how do you know if you can finance purchasing the home you want?

The first step of finding out if you can finance a property purchase is to get information together on your assets and your liabilities.

Assets are things like money, shares, superannuation and real estate.

Liabilities include loans, leases and credit card debt.

You will also need to get together proof of income which may be payslips from your employer or past tax returns from the Australian Tax Office.

If you already own a property, this will involve having a market appraisal on your real estate. PILOT can give you a free market appraisal for your property. A market appraisal will state the agents opinion of value of your property at the current time.

The second step is to make an appointment with a lender or mortgage broker. PILOT can give you the contact details of lenders and brokers who are currently offering great deals on home loans. The lender will arrange a finance pre-approval for you. This is so you can shop for a property with the confidence of knowing what you can afford to spend. Consolidating loans and cancelling credit cards you no longer use might assist your pre-approval.

The third step is to make an offer to buy the property subject to obtaining a finance approval. Obtaining finance from the lender generally takes around 14 days so your offer should allow for this as a finance condition.

You will need to provide an upfront deposit to the real estate agent when you buy, so you usually need available funds of between 5-10% of the purchase price.

The lender will then arrange a valuation on the property to check if your offer is consistent with the property’s market value.

If everything goes smoothly with your finance application and the valuation, the lender will give you a letter of finance approval. Your conveyancer or solicitor will handle the final stages of arranging for the property to change legal ownership.

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