Mortgage Stressbusters by Alex Brooks

Author:Alex Brooks
Language: eng
Format: epub
Publisher: Wiley
Published: 2011-12-23T00:00:00+00:00

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Question: What happens when I’ve made an offer and signed the contract?

Answer: All kinds of little things can trip you up on the way to settlement.

It can seem deliriously exciting to have mortgage approval and a signed contract for the property — only for things to go horribly wrong before settlement date. It happens more easily than many residential property buyers realise. And with most contracts including penalties — such as interest — for late settlements, delays can be expensive.

Delays commonly occur because of a breakdown in the loan process or an odd little quirk of legality. For example, making sure the name on the purchase contract is the same as the name on the loan application can be a key detail to check. If Jane Nerk applies for the mortgage, but the contract is signed by Jane Elizabeth Nerk, it can cause problems.

If there is a black mark on a credit record, it can be hard to get finance to complete the transaction. Problems can also arise if you have recently changed jobs or become self-employed. If refinancing, it’s worth checking such things as your past loan statements and ensuring that council rates have been paid.

If you are borrowing close to your lending limit, you need to be aware that the limit applies to the value of the property or the purchase price, whichever is lower. If the valuation comes in short of the amount you need to pay for the property, you might find yourself having to source another lender, or stumping up more cash to complete the purchase.

Then there’s the simple stuff of getting the paperwork right. Applications are often slowed when borrowers don’t disclose all the information needed, lose documents or don’t sign them correctly. Getting a loan approval before you go shopping for a home can cut delays when it matters. Housing finance complaints to the ombudsman tend to revolve around delays in loan approvals and settlement. In property boom times, banks or lenders can be short staffed and take time to return lawyers’ or conveyancers’ phone calls.

Property delusion: when prices are rising, buy quickly before they get even more expensive

Truth: Property fever can lead to what’s known as ‘price bubbles’ — artificially inflated prices that then drop back over time. Periodically, buyers catch property when prices are rising quickly and then regret their decision when they are unable to sell and recoup their purchase price within three to five years. In fact, you may need to ride out two property cycles of boom and bust to recoup an over-inflated boom-time purchase.

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