Loan Duration

Oh right!! Now I see, I didn't realize you were locked into that initial minimum payment amount for the life of the loan. You're essentially fixed to that initial figure. I actually thought by making extra payments would also reduce the future amounts you had to pay back, that's where I was confused.

I've been playing around with some mortgage calculators and can see how in my example paying down a $150K deposit and taking out a $250K loan for the remainder (at 3%) would have fixed yearly repayments of $12,648 for the life of the loan.

Making the smaller deposit of $80K and larger loan of $320K would have fixed yearly repayments of $16,188 which doesn't change even when paying in an extra $70K straight off the bat. The interest amount is reduced though quite a bit, which ends up shortening the loan period by about 10 years, but the yearly amount required stays at $16,188.
(*this of course isn't taking into account moving interest rates).

 

Definitely this as well, I don't like having all my cash tied up, it's a peace of mind thing for me. Which is why I think an offset account would work for me for any funds I decide not to put into the deposit. With the constant drop in interest rates, even my "high interest" saver accounts aren't making me much anymore.

 

15 years in this industry, I've only ever seen one client loose a deposit and I made it very clear to them from the beginning there was going to be trouble. It does happen, but it's incredibly rare.

If you can negotiate a $1k deposit, go for it. The rest of the money is always going to be better in your account than the real estate agent's.

My thoughts are really around the size of the equity release. You need enough for the 20% (or 30%) contribution and costs. You might want some more for renovations or a contingency fund. Perhaps you're thinking of another purchase later on, organise the funds for that now as well.

Consider this against other factors. Will your borrowing power allow you purchase another property after this one? If not, then perhaps you only need $250k instead of $500k. Sure you can always put the extra money back on the loan, but I've seen plenty of people simply go to town and waste it. You need to be realistic about what you can do and what your personal habits are as well.

As in all things, there's no answer that suits everyone. Just make sure you understand what's going on and what suits you best.

 

That's interesting to know! So I guess if you recast the loan like this the balance gets spread back over the 30 years, and the monthly repayments get locked into a lower amount?

I've read over this a few times and still find it a bit confusing. So the amount I put down in the offer under the deposit section isn't the full deposit? Then lets say I put down 10% as part of the offer, so when I organize the loan I'm only paying another 10% deposit to make up the 20% required for no LMI?

I have been reading a few similar scenarios and from what I can tell Agents just send out the actual contract of sale for the offer... is that normal? Like this case here: Providing details for formal offer - Buying/Selling - Real Estate - Whirlpool Forums

 

Best to avoid whirlpool forum there is so much misinformation there it is dangerous.

 

By this I assume you mean the "purchase deposit" like Rolf was talking about? not the full deposit amount?

Same, which is why I'm planning on at the very minimum making a 20% deposit (maybe more) and putting the remainder I have in an offset account to minimize interest as much as I can. If I didn't have to pay any interest I would as I just see it as dead money.

I'm not looking to make further purchases, I'm basically your traditional home owner, just wanting a place of my own. Have no ties to anyone else either, so what's mine is mine. Really wanting to set everything up to pay it off as soon as possible (potentially in 10-15 years), or if something unexpected happens be able to reduce monthly repayments to the bare minimum and have easy access to cash.

I've been a saver for the last 25 years, don't do anything lavish, don't wine and dine or have any expensive sports cars (I ride the bus). Just wanting the best strategy to get the best deal I can in both property purchase and loan.

 

That's fair enough, but the person asking the question seems genuine enough, and quite a few people seem to have been sent an actual contract of sale as the offer document. Without having gone through the process myself I'd still be interested to know is that normal?

 

I am not sure what you are asking exactly but generally you can make an offer based on price via the phone etc. Informally. If that is accepted you can sign a contract of sale which will have the full terms of your offer. You would generally pay 10% then or less but not more. If the seller accepts this offer you have a binding contract, but it might still be subjected to conditions such as finance if the contracted included these terms before acceptance.

Then if you are borrowing less than 90% you would need to pay some further funds at settlement in addition to what the bank is lending.

 

Basically if I'm talking to the agent and say I'm going to put in an offer, and he comes back with an actual contract of sale expecting me to fill that out, is that the normal process? Because to me (with no prior history in real estate) that just seems odd, and like he's trying to get information out of me that I may not be ready to give out so soon, or trying to speed things up before I'm ready. I'd feel pretty overwhelmed filling out a contract that quickly.

I thought I'd just be able to send them an email with something like "I'm offering $XXX, this is subject to finance and building / pest inspections and XX other conditions. I'm looking at XX settlement date but am happy to negotiate around the sellers requirements. This offer is open until 5pm tomorrow. I require a signed letter of acceptance to this offer".

So in that there wouldn't be any mention of deposits, amounts of deposits, or anything about my financial situation.. why would I reveal any of that until they sign on my agreed price? And isn't it bad for a buyer to sign a contract before getting finance 100% approved and inspections done, so filling in the contract is the last thing in the process once everything else is okayed?

 

Yes that is right
without a contract how do they know the terms of your offer.

But before that stage I would verbally narrow down price. be careful or writing things, including emails as once a written offer is accepted it could mean you are contractually bound.

get legal advice

 

So much different advice I've been getting. I've been told elsewhere: "always make the offer in writing, and have them accept it in writing either on paper or email."

I've been told this as a way to keep the seller from accepting other offers while I'm potentially getting finance and inspections sorted.

 

If they have accepted one offer they could not accept another.

 

Again, this is different advice to what I've been given. Isn't this what gazumping is? Tasmania has no cooling off period, so I'd need to arrange everything before signing the contract, so there would always be a risk of them taking another higher offer during that time. So that's why I believe I'd need them to agree to a price in writing, but maybe the whole process is confusing me again, as I've been told different things by different people.

 

Best to seek legal advice from a solicitor practicing tas law. I have bought a few properties there but always used a local lawyer