Buying your first home is a significant milestone, but it can also be a complex process filled with legal hurdles. Understanding the legal steps involved can save you from costly mistakes.
Step 1A: Understand the Contract of Sale
The contract of sale is a legally binding document outlining the terms of the property purchase. It includes details about the price, deposit amount, settlement period and any special conditions. First-time buyers should have this document reviewed by a solicitor or conveyancer to ensure the terms are fair and transparent. We cannot urge this enough, please ensure that you obtain full, formal and written advice before you enter into the contract! Understand what you buy before you buy!
Step 1B: Conduct Due Diligence
Due diligence involves verifying all critical details about the property. This includes reviewing a title search, which ensures the seller has legal ownership of the property and checks for any encumbrances (e.g., mortgages or easements) that may affect the property.
Additionally, buyers should arrange a building and pest inspection report/obtain a strata report to uncover potential structural issues or infestations or expensive strata fees.
Buyers should also ensure that they have physically inspected the property in detail to ensure that they are happy with going ahead.
Step 2: Secure Financing
Obtaining pre-approval for a mortgage is essential before making an offer. Once a property is selected, you’ll need a formal loan agreement with your selected bank. Ensure you understand the terms, such as interest rates and repayment obligations, to avoid future financial strain.
Further to securing and understanding the loan agreement, buyers/borrowers should ensure that they understand any securities being requested by the bank. For instance, the bank may require a personal guarantee, a mortage on another property, a Personal Property Securities Register (PPSR) security interest and etc. If you are unsure about this, obtain advice on securities immediately.
Step 3: Pay the Deposit
A deposit, usually 5-10% of the purchase price, is required to be paid on or before expiry of the cooling-off period. This amount is typically held in a trust account until settlement.
As a side note, upon exchanging contracts, a holding deposit is usually immediately payable. This amount is typically 0.25% of the purchase price.
Step 4: Comply with Legal Obligations
First-time buyers may be eligible for government incentives, such as stamp duty concessions or first-home buyer grants. Ensure you apply for these benefits within the required timeframe.
Another critical step is obtaining home insurance (and if you would like content insurance) before settlement, as many lenders require proof of insurance to protect their interest in the property.
Step 5: Attend Settlement
Settlement is the final stage where legal ownership is transferred from the seller to the buyer. During this process, your solicitor or conveyancer will ensure all documents are in order, payments are processed, and the title is registered in your name.
Key Definitions
- Contract of Sale: A legal document that sets out the terms and conditions of a property transaction.
- Title Search: A search of public records to verify ownership and identify any restrictions on the property.
- Encumbrance: A claim, lien, or restriction on a property that may impact its use or transfer.
- Settlement: The process where the final payment is made, and ownership of the property is transferred.
This article is for informational purposes only and does not constitute legal advice. It is only a summary overview of the steps and only outlines some key steps in the process. For specific legal guidance tailored to your situation, consult a qualified property lawyer.
Navigating the legal steps of buying your first home can be overwhelming, but you don’t have to do it alone. Contact Skyline Lawyers today to ensure your property purchase is handled professionally and stress-free. Our experienced team is here to guide you every step of the way.
