BUYING YOUR FIRST HOME by Tuhin Mitra

How to Buy your Dream Home

Table of Contents Contents

Introduction to the Book

Focus on Real Estate

How to buy your First home

Buying a home

Purchasing an apartment

How to Reduce your mortgage faster

Need of Remortgaging

Conclusion

Glossary

How to Buy your Dream Home

Introduction to the

Book

lllhe need of As per recent consumer research, it has been observed that consumers apprehend that homes were built better in those “good old days”; where the architect or craftsman would lovingly and caringly put together the building components. They seemed to really know their stuff and were perfect in their analysis. But this is a myth where the reality is such that newly built houses are far superior to those built in the past in terms of material, architecture and design. It is essential to make the consumer understand and aware about the fact newly built homes are much better than those of the past in view of amenities and the facilities that a consumer enjoys today as compared to that of the past. It is here that this book comes into being substantiating the benefits of acquiring a new home. For the home owners of today this superiority translates into benefits that home owners of the past perhaps could never imagine or dream of. This book highlights processes of a acquiring a new home inclusive of issues of legality and costs, avenues of finance, several advantages of owning an apartment, the types of apartments, a host of effective insulation products, energy efficient heating and cooling systems, exquisite layouts and designs; this book has it all! This informative guide also guides you in acquiring your home according to your aspirations and desires, keeping in mind the diverse mindsets, preferences, likes and dislikes of the consumer. It enhances your knowledge on filtering that which is reputed and that which is not. Whether you are already a homeowner or are looking to buy a new home, this book serves both the purposes, since much is stressed on saving and clearing of your loan mortgage by implementing effective loan mortgage strategies. In view of the aforementioned sentence, savings is important for everyone. For the person looking to buy a new home a good amount of savings can enable buy an exquisite home while for the person already possessing a home, savings and effective loan-mortgage strategies can help him enhance his/her comfort zone or it may even help him/her buy a better home. Well, this is just the tip of the iceberg! There is much to discover and much to learn and this book is just serving the purpose of helping you own a new ‘haven’.

How to Buy your Dream Home

Another important thing that this book focuses on is on the real estate or better expressed as the ‘reality estate’. This is because you can’t just dream about owning a home but it must become a reality at some juncture of your life. The ‘metanoia’ has to begin and this book helps begin the process to convert your dream home into ‘realty’. And the truth is that there is no better investment than investing in your house. In these times where several investments, banks and financial institutions are collapsing, your home will still stand amidst this collapse. In this context owning your home not only gives you a personal satisfaction but secures your life forever. It is well said by someone that "The tools and the technology may be different, but the goal of a good builder never changes: to provide the customer with the best possible home for years of enjoyment and satisfaction." So enjoy the facilities of a good builder, an enhanced building process, effective strategies of finance and last but not the least the comforts of newly owned home.

How to Buy your Dream Home

Focus on

Real Estate

lllhe need of

The term ‘real estate’ is related to law and falls under a certain jurisdiction, which states about a land or an establishment over the land, whose location is fixed. Multi-storey buildings are establishments on the land which can be referred as real estate. Legally the term real estate is sometimes referred to property. The real estate laws of have certain regulations and codes that have been framed according to different jurisdictions of different countries.

is a broad difference between the ‘personal property’ (which includes cloths, books, furniture etc) and the ‘real estate property’.

Real estate is often known as realty (sometimes real property) and is considered different from any personal property. However, ‘real estate’ can be termed as both fixtures and land which is different from ‘real property’ to some extent. The term ‘real property’ or ‘real estate’ is a common term used in law, while in context of civil law, these terms are related to ‘immovable property’.

As far as the records are confirmed, the term ‘real estate’ was used first in 1666.

The history of the word ‘real estate’ The word real estate in law means a ‘matter’ (in latin also it means ‘matter’ or the thing), but in terms of legality there

There is a conceptual difference between movable property and immovable property. In movable property, a person remains entitled to the land even after transferring the land, while in immovable property the ownership is also transferred with the land.

The usage of the word ‘real’ refers to land and this means that during the past there was an importance of land and ownership. The significance of land portrays the existence of the feudal system in medieval times from where the common laws relating to land and properties evolved. According to etymologists, the word real is derived from the word “royal”. The word has a close relation with the Spanish term ‘rex-regis’, which literally means king. Then, what is the relation

How to Buy your Dream Home

between the king and real estate properties? There is certainly a close relation. Previously, the king or the royal family was the owner of the land and peasants use to pay them taxes or rent for residing and tilling on the royal lands. Quite similarly, even now, we pay the rent or property taxes to the government. That’s why the term “real” has its relation with the Latin version of the word ‘king’.

working in these varied fields of the real estate business are known as specialists who have the ability to quote different values and facilitate transactions. The businesses related to real estate are:

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Appraisal – it is a professional service for valuation

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Brokerages – act as a mediator to assist in the real estate transactions between two parties and against the service they charge a fee.

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Development – improves the conditions of the land by constructing or renovating buildings

Business sector

Since the ownership of the private property has increased, real estate has become a major arena of business. The investments in real estate are significant because of the unique characteristics of the land; thus due to huge investments the real estate industry has evolved into different distinct fields. Individuals

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Property management – an individual who manages the property on behalf of the owners

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Real estate marketing – manages the sale proceedings of the property business

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Real estate investing – looks after various investments of real estate

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Relocation services – provides relocating services to people or business in different countries

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Corporate real estate – managing the real estate properties by corporation for supporting core business

All the Above mentioned fields have different areas of specialization for specific kinds of real estate business such as residential, industrial or commercial. Above all of this, the whole construction business is associated with real estate. In recent times and in this era of the internet, the real estate business can be transacted online. The Internet online real estate business comprises of several domains and communities dealing in the real estate business.

How to Buy your Dream Home

Special reference: Residential real estate

perimeters. This is a common feature of every multi-storey apartment.

In context of the residential real estate, the term ‘housing tenure’ is commonly used. It means the legal proceedings of a person for ascertaining the right of his ownership on a house. Housing tenure also includes other important terms like Tenancy, owner occupancy, housing cooperative, condominiums, public housing, squatting, and cohousing.

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the multi family house is a multistorey building where one apartment is covered on a single floor.

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Houses having similar physical features often have different housing tenures. For example a connected residence having a single owner can be leased out, or if they have separate ownership, they can negotiate between units and common interests through an agreement.

A Terraced house can be a single or a multi-unit building which has a continuous row of shared walls and with no space in between. It is also known as row house or town house.

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Physical categories of the real estate properties

• •

Multi-unit or attached dwellings Apartments can be an individual unit amidst many units in the building. The apartment boundaries are defined by

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Condominium is referred to a complex or buildings that have similar features of an apartment and can be owned by an individual. The condominiums can have a style of that of a rowhouse or townhouse. It is an unit where two apartments are inter connected with each other and are generally known as duplex or condominium.

Single family homes and portable houses are also two categories among the real estate properties. Among the portable houses there are subcategories like: houseboats (floating homes), tents (fabric like material is used for its floors and ceilings and are generally temporary) and mobile homes (sometimes used as permanent homes that move on wheels). The size and other dimensions of the house are measured in meters or square feet. While measuring the size a house in most of the cases, the garage and the non-living spaces are excluded. In few areas, the surrounding walls, the garage, and other ‘non-living’ spaces are included while measuring the dimensions of the house.

How to Buy your Dream Home

significant obstacle in context of investment in real estate in many developing countries. In most of the countries, either poor or rich, a major portion of the total wealth comprises of properties, lands and buildings.

The dimensions of building also matter with the number of rooms. The apartment size may vary according to your living rooms. Like a studio, an apartment has single bedroom, a separate kitchen but no living room. A one bed room apartment has a dinning or a living room along with a bed room. Sometimes the apartment may have two or three bedrooms.

Mortgages Many economists in recent years have identified that the absence of effective real estate laws can pose to be a

In most of the developing countries, the individuals or small companies improve or purchase lands and properties with the help of mortgage loans. This is a type of loan by which the real estate property remains secured. The bank lends mortgage loans at affordable rates of interest and in case, the borrower is not able to make payments, the bank then can foreclose the property. The bank conducts the foreclosure with legal action to sell the property so that their money is recovered. In case of investors, they earn profits by implementing their pre-construction strategies. They purchase the house at a lower price generally during the preconstruction phases of the property.

However in many developing countries effective means of foreclosure doesnâ&#x20AC;&#x2122;t exist. Thatâ&#x20AC;&#x2122;s why the mortgage loan industry may or may not exist in these countries or may be available only to privileged classes.

How to Buy your Dream Home

How to buy your

How much should you deposit?

First Home

Your neighborâ&#x20AC;&#x2122;s house may envy you! You may have a hidden desire to purchase a similar home, but there may not be a way out! You may not have sufficient money for purchasing your dream home! It is a known fact that if your savings increase, then you will be able to purchase your desired property at one point of time. On the flip side, if you fail to save sufficient money, then chances of purchasing it is less likely. Over and above, your negotiation skills also play a major role in determining how well youâ&#x20AC;&#x2122;ll be able to repay the loan. A good saving can also prevent you from investing in mortgage insurance. So what are the ways using which you may add to your savings? Paying a house rent and making an attempting to save simultaneously may turn out to be a difficult task!

How to Buy your Dream Home

However, for those living with their relatives or parents, may find it easier to save as compared to individuals who have to pay house rent on their own. But, this doesn’t imply that individuals, who pay their own house rent, cannot save. They can surely move onto a house where the rent charged is reasonable. It’s true that initially they may have to make some adjustments, i.e. they may not find an ideal accommodation for quite a few years. But, this adjustment of theirs will not go wasted! Remember the saying “A little progress everyday adds up to big results”! Just think, they can purchase their dream property with the help of the money they have saved in all these years.

For planning a budget, be sure that you take into consideration the steps mentioned below:

• Keep a record of your overall expenses. Mark the expenses that cannot be curtailed by any means. • Find out ways to reduce the expenses that aren’t fixed. • After receiving your salary, be sure to deposit some money in your savings account. It would be better, if you put your savings in a fixed deposit account. • Opt for savings programs that offer high interest rates as well as little or no account fees.

Irrespective, of the accommodation and income costs, budget planning is considered to be an ideal option if one aims to save a good deposit. This approach may be considered as the initial step towards monetary prosperity. Interestingly, this also paves your way to purchase your first home.

How to Buy your Dream Home

Amount that should be borrowed In the previous section, we had discussed about budget planning and how it helps us to save for buying our first home. We had also discussed how budget planning helps us to save our deposit. But, suppose despite saving for years we run short of quite a few dollars! So should we give up our idea for purchasing a home, simply because we are running short of some dollars? At this point of time, we may take help from a lender/bank who agrees to provide us a home loan. But wait! Before taking a loan, see to it that you are able to repay it within the decided time frame.

estimating the amount that you need to borrow.

The other items that you should budget for include-

Your lender may ask you to get hold of a certified valuation of your property. Some lenders usually arrange this property valuation free of cost while others may charge a nominal amount for this purpose.

You may even consult a mortgage broker for this purpose. He will help you to calculate the amount that you need to borrow, the repayments and so on. He may go through the budget to check whether you’ll be able to afford the repayments or not. Ensure including the conveyance fees, loan costs and transaction or stamp duty taxes while

•

Property insurance: Almost all lenders ask for a proof that your property is insured.

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Taxes and rates on your property, and at times “body corporate fees”- The expenses associated with property taxes or rates are “fine-tuned” on settlement.

•

Conveyance costs as well as the cost involved in unavoidable incidentals: You may find innumerable things that require improvement or fixing for making your house comfortable.

How to Buy your Dream Home

Budget Planning for repaying your loan While preparing your monthly budget you should include sewerage and water charges, home repairs and maintenance, body corporate fees and council rates and charges. You may consult your homeowner friends or brokers for estimating the amount that you need to keep aside for the aforementioned expenses. Ensure budgeting for the interest rates as well. It is because the rate of interest may fluctuate from time to time. If you have a pre-planned budget taking into account these fluctuations, then there is nothing to worry even if the rate increases. This is usually relevant for people who have agreed upon a variable or floating interest rate for repaying their loan. You may consult the mortgage broker to know about the impact of an increased rate on the repayments. In simple words, ask the mortgage broker how much you need to pay in case the rate of interest increases.

A majority of homeowners may face financial crisis or devastating losses as sometimes they are unaware of the fact that the rate of interest may rise sooner or later. As a result, they donâ&#x20AC;&#x2122;t include these added expenses in their budget. Be sure to prepare a monthly budget that includes expenses like buying major appliances or furniture, replacing your old car with a new one etc. Ensure yourself insuring against serious illnesses or accident. Ensure having a proper life insurance plan as this will prevent your family members from being deprived of their homes in case of your sudden death. You may even consult a financial adviser for preparing a budget.

How to Buy your Dream Home

Help from government

in N.S.W, the “First Home plus Scheme” offers transfer duty or stamp duty concessions for the ‘first home buyers’. They also provide concessions on mortgage duty to first home buyers.

In July 2000, the Commonwealth Government introduced the FHOG or First Home Owner’s Grant. This was introduced in order to counterbalance the GST’s impact for people who are purchasing a home for the first time. The qualified applicants get a “one-off cash payment” of $7000 (approximately) for using towards their deposit.

However, there are certain terms and conditions associated with this benefit. For example, the eligible applicant should have attained 18 years of age. The applicant should buy or build a property within one year after the settlement. Next, he/she should reside in the purchased home for six consecutive months. Eligible applicants are exempted from paying mortgage duty or transfer duty if they purchase a property valuing up to $500,000.

However, there are certain terms and conditions associated with this grant. For instance, in order to receive this grant the applicant should buy or build a property within one year after the settlement. Next, after the applicant has purchased the home he/she should stay in it for a minimum of six successive months. Finally, the applicant as well as his/her spouse should be a permanent resident or citizen of Australia.

Proportional concessions are allowed if you purchase a property jointly with another party (assuming that this party owns a property from before). However, you may not get any concession if your spouse has already availed the “First Home plus benefit”.

How to finance your purchase You may have to borrow a significant amount for purchasing a property. Hence, be sure to choose a good lender. Over and above, ensure negotiating with him about the how to repay the loan, the interest rate etc. Don’t think that you are on the weaker side while negotiating with the lender. The lending market is highly competitive, and lenders are always eager to find a

The first home buyers also benefit from the State Governments through concessions on stamp duty. For instance,

How to Buy your Dream Home

suitable borrower. Hence, if you feel that you lack negotiating skills, then it would be better to hire an agent or borrower for this purpose. However, before starting off with the negotiating art, it would be better to do a good research work. To be more specific, you need to-

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Obtain a somewhat fair idea about the different types of loan

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Be familiar with the terms that lenders use while negotiating

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Obtain an idea about the boons and banes of each loan type

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Be acquainted with the terms used in loan documents

Lenders & Brokers Even some decades ago, people had to go to their respective banks, if they desired to take a home loan. Another option was to borrow money from private lenders such as solicitors etc at a higher rate of interest. In recent times, banks compete insistently to win business. Moreover, a majority of banks also provide loan to non-customers (i.e. the people who don’t have an account in these bank can also avail a loan). Additionally, there are several non-bank lenders from whom you can borrow money.

You may even hire a well-known mortgage broker for this purpose. Almost all brokers get a commission from the lenders. As a result you don’t have to pay extra charges for the services they render. Brokers are highly experienced and know how to deal with the lenders. They are well aware of the offers rendered by the lenders and hence can bargain accordingly. At the end of the day, a broker may get you the best possible deal. Remember that the brokers work on your behalf and not for the lender. Their aim lies in negotiating with the lender and finally providing you the best possible deal. They work on your behalf, thereby saving much of your precious time. Alternatively, their negotiation skills help you to save a significant amount of money. They may also give you an idea about the amount that you’ll be able to repay within the given time period. Additionally, they’ll also help you out with the various loan features as well as their advantages. They’ll tell which loan type is best suitable for you. Brokers may also help you out with the tiresome application procedure. They’ll help you in

How to Buy your Dream Home

•

understanding the contract adequately, so that you are well-informed about the risks (if any) associated with it. A broker is well versed with the requirements of the lender and will inform you instantaneously if he suspects that the lender may reject your application.

Types of Loan Most of the loans have to be paid after a certain period of time. The interest and principal amount is basically paid as the total loan payment. However, you can also opt for an ‘interest only’ loan where the principal amount is paid after the loan term expires. For an ‘interest only’ loan, you just need to clear the interest amount of the loan. An example of interest only loan is bridging loan. They are only used for a short term like if you purchase a house before you have sold the present one.

The different types of loan are mentioned below:

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Fixed interest (the rates of interest are settled when a loan is being accepted & it can’t change later on)

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Variable interest (the rates of interest rise & fall based on the market changes)

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Fixed for a period (often called ‘honeymoon’ period) and then variable.

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Split (fixed rate of interest on one part of a loan & variable interest on the ‘balance’)

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Capped interest (rate of interest can fall, however it can’t rise more than the agreed cap)

Line of credit – it resembles a ‘cheque account’ having an overdraft. Here, you are able to deposit whatever amount you want and whenever you like. You can also withdraw from this account for making payments. The balance keeps on rising & falling. The calculation of the interest is done on the daily balance. Rules on minimum deposit and certain other limits may be applied.

‘Basic loan’ is a type of inexpensive and inflexible loan. Other types like standard loans and special loan packages have different features of offset and redraw. These features allow the borrower to make extra payments and repay the loan as early as possible without any penalty. Redrawing options and credit loans are more advantageous for people who can well manage their money. But if you have a tendency to overspend, it is better to avoid these kinds of loans.

How to Buy your Dream Home

Important loan features As mentioned, that standard loans and special loan packages have certain important features. Let’s discuss these features in detail: Redraw: If you have repaid the loan amount in time, you can take back or redraw some money, which you have paid earlier as repayment. This will increase the balance of your loan again. This would help you with ready cash if the term of the loan or the repayment amount increases. The redrawing facility is very helpful in case if you encounter any unforeseen expenses or want to renovate your home.

Offset: Few lenders can counterbalance the interest of your savings account with the interest rate of the loan with a process called ‘offset’. For example – if your loan amount is $300,000 at an interest rate of 8% and you have $50,000 in your savings account, instead of earning an interest rate of 5% (or less) on the savings, you may pay the loan interest on only $250,000.

Applying for the loan You have to ‘substantiate’ your expenses, income & savings when you apply for a loan. You can submit a ‘letter’ from the employer, pay slips, tax returns, or ‘profit & loss’ statements that the accountant provides as a proof. Any mortgage lender or broker will give you a ‘checklist’ of an actual document that you need to submit while applying for a loan. Therefore, do not worry about the other documents you are required to submit.

Your lender would ask about your ‘living expenses’. Always be truthful to him. Provide the exact copy of the document that you really spend on things. This document will include membership of professional associations, electricity bills, tools required for work, telephone bills, insurances, entertainment, costs for child care, school fees, motor vehicle costs etc. The lender may also ask if you owe any money to someone, in that case, what amount are you repaying every month, what is the amount that you owe at present and the rate of interest that you are paying. Make a list of all the financial obligations like:

• • • •

Leases

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The payments that the court has asked you to pay to any former children or spouse or to some creditor.

Loans Purchase agreements against hire The agreements of paying on time with creditors

How to Buy your Dream Home

Documenting all your financial obligations before applying for the loan or even before looking for any property may be a wise decision. After adding all the income that you actually get & deducting all the expenses, the balance amount (other than the ‘contingency allowance’), is the actual amount which you can utilize for ‘paying’ for your ‘home loan’. Therefore, making any commitment that you can pay anything more than this amount is really not advised. The lenders can sometimes put a bar on the amount that you can borrow so that the repayments that include the rate of interest aren’t greater than 1/3rd of your present income. Now, that is a fair deal! Isn’t it? Therefore, you should carefully check your income & expenditures in order to figure out the amount that you can comfortably repay for your home loan.

your loan is approved as soon as possible. The process of loan approval may take many days and sometimes even weeks. After the approval of the loan, you will receive a contract. The lender will ask you to show the loan contract document to any ‘independent advisor’ who would make you understand the contract before you actually sign it. This is considered to be a legal necessity as far as your protection is concerned. See to it that you are fully familiar with the terms & conditions. Do not hesitate to ask any question in case you have any.

All about mortgage insurance The lender can ask for mortgage insurance in case you borrow 80 percent or above the property’s value. A one-off insurance fee is paid that is added to your loan amount, so there are not upfront costs. It is very important to understand that mortgage insurance is for the protection of the lender and does not protect you in any way. It protects a lender when you can’t make the payment for a loan & your house gets sold faster than the ‘outstanding loan balance’. Despite the lender paying the difference of the loan balance and the amount recovered by selling the property, you are still liable towards the lender for that amount. The only benefit that you get for doing this mortgage insurance is that you will be able to buy a house by depositing a small amount of money.

The mortgage broker may help you in assembling all the information with the least imposition on time. He would also prepare your loan application so that the lender is able to process it very fast &

How to Buy your Dream Home

Choosing the right house After you know that you are eligible to borrow a certain amount, you should now figure out that how much money you can actually afford to pay for the house. Hence, you can start looking for a suitable property. If you want to opt for an insurance policy that will protect you when your income levels is somewhat experiencing a down trend, you should consult the advisor regarding an insurance policy that will protect your income. It is also better to review the accident, sickness, and life insurance. Your obligations to repay the loan do not go away only because you are experiencing misfortune. Whatever the situation may be you are still obliged to repay your loan!

You should be very careful while choosing the property. Make a thorough research of the market & see what kind of property is available within your price range. For locating the right house, you should try to gather information on the ‘sales background’ of a particular area. The magazines and newspapers advertise many properties that are offered for sale. The Internet can also help you locate the right house. They have regular updates of those properties that are offered for sale. They not only provide the value of a certain property but also informs about the current sales history of a particular area.

Information about the properties that are offered for sale and also suit your requirements are often provided by the real estate agents. You should clearly mention everything that you wish your house has. You should also mention how much you can afford to pay for the house right now. Make a list of your preferences and personal needs & categorize them according to their importance. The list should consist of 10 things that you want to have in the house and ten things that you don’t desire having. You should be very clear about your preferences. While buying a house, you may have to compromise on certain areas. So it is important to decide beforehand which areas you can compromise and which you can’t.

How to Buy your Dream Home

So friends, now you are all set to go for inspecting the properties. Always keep in mind that there can be no substitute of performing the ground work yourself. Make sure that you inspect the houses yourself; after all you can be the best judge of your home. Consider the floor plan, size, land size, construction and orientation of a particular property before buying the same. You should locate the nearest shopping complexes, businesses, schools & sporting facilities are located. You should also see whether the public transport facilities, the train and bus station are within easy reach or not. Ask whether there will be any kind of development in that particular area in the recent future. The propertyâ&#x20AC;&#x2122;s condition should also be considered. See if the house requires any kind of expensive maintenance or renovation. You should also check if there is any risk of termite damage or some other structural problems.

Make sure that your property is not exposed to flooding. Checking for the security of the area is also crucial. If possible, try to find out who will be the prospective neighbors. You should compare different properties while buying a house. When you decide on the price of the house, make sure that the amount is affordable. Take your own time for deciding everything. After all buying a house is a very big decision. It involves a lot of your hard-earned money. The agents can sometimes provide help with information about different properties & different areas. But you should always keep in mind that the agents work on behalf of the sellers, so better be careful. Their advice might not be always unbiased.

You should make some arrangements for pest and building inspections prior to buying any house. This should be done to ensure that the house has a solid foundation & it was maintained properly and you will not have to cater to any kind of maintenance or structural problems. You may also include a condition like â&#x20AC;&#x2DC;subject to inspectionsâ&#x20AC;&#x2122;, however, the seller need not agree to this. While looking for the suitable property, make sure that you have a conveyancer or a solicitor who will work on your behalf while purchasing the house.

How to Buy your Dream Home

Contract exchange When you are going in for the final contract with the seller read all the important documents carefully and then sign. One of such document is ‘contract of sale’, which both the seller and the buyer need to sign. This piece of paperwork should have a couple of duplicate copies, which should be distributed between the seller and the buyer. The contract should have a detailed description of all the rules and limitations of the sale. It may include special conditions which makes the sale subject to sale of any other properties, building or pest inspection, or subject to financing. The ‘sale of contract’ contains all the necessary inclusions and specifies important exclusions. If you are worried about the settlement date, go through the contract and you will come across a ‘settlement date’. After knowing the date, you could know now plan your financial steps so that you could repay the balance price and have the legal ownership of the home as early as possible.

After the contract is signed, there is five days “cooling-off” period and once it is over both the parties should abide by the contract. So within those five days, you can obtain reports about the building and can arrange for your finance. Your solicitor is responsible for finding whether the seller legally owns the property. Ask your solicitor to check whether there are any restrictions or any liens on the property. The property is generally evacuated for the buyer to get in immediately after the settlement, but sometimes the buyers move into the house if the party wishes to or can ask the vendors to stay for few days. Before signing the contract, allow your solicitor to read the contract so that he can make you understand all the important points. After you sign, the contracts are exchanged and your solicitor receives the copy signed by you. After signing, you need to pay for the deposit amount (usually 10%) to the seller, to the agent or you may deposit the same into a bank account till the settlement.

Insured and safe After the contracts have being exchanged, any accidental damage to the property may result in a financial loss for the buyer. Therefore, it is always necessary that the property should be insured right from the date of contract exchange. Just give the insurer a call and ask them to issue a cover note and in response they will give you a time of 28 days. After the period the insurer will confirm the agreement policy terms and you pay them the insurance premium.

How to Buy your Dream Home

Final settlement After the five days cooling off period, your solicitor will arrange for stamping the contract. You have a time of three months for making the payments from the contract date but it is mandatory that you pay the amount before settlement.

The conveyeners calculate the settlement amount and decides on behalf of the buyer and the seller. The amount includes adjustments against unpaid rates and taxes or on any advance amount. After ascertaining all the calculations, the agent will inform the lender about the amount required for settlement. Before the settlement, you must conduct a property inspection to make sure of few things like whether the house is in a perfect condition, or the sellers has not removed anything (mentioned in the contract) and no such damage has occurred when you agreed to buy the house. The lender may ask you to open an accessible account. The lender generally sends his representative to participate in the settlement and the person pays the amount for your property. The agent or the conveyancer will check all the documents to finalize the legal transfer and may collect the keys on your behalf and hand over it to you. After the settlement is complete, the agent also ensures that all the legal requirements are being carried to entitle the ownership to you.

Move in to your new house Now you are an owner of a home at last! Before you move in to your new house, make sure that all the supply lines pertaining to electricity, water, telephone, gas are working. Amend a file for the electoral role registration and inform the change of your address to your solicitors, bankers, accountants, service suppliers, friends and relatives. Get ready for a party at your new home!

How to Buy your Dream Home

Now plan further Buying property is a one of the most significant investment and is also one of the major steps of increasing your wealth. So while you are at your new home and enjoying the new atmosphere, plan out something important for the future like:

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Work out for a profitable financial plan for the future

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Make necessary arrangements to protect your assets and wealth, in case of any misfortune in the future.

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Learn about the tax, the superannuation and investment from accounts or solicitors.

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Plan out children’s education and their future

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Increase the equity value of your home and prepare a good investment portfolio.

An individual needs an apt financial planner or an advisor, who can judge his every financial endeavor. This would help you to achieve the financial success and freedom and would help you to believe that you could really achieve everything.

If you get the right mentoring and guidance, you can overcome all financial stress and can create a plan for a complete financial security and comfort…even spending on luxury purchase and holidays. If you have the right partner or a perfect guide to advise, help and support you, you can almost achieve everything.

How to Buy your Dream Home

The necessary research work

Buying a

Home

Buying a home is a big decision. Therefore, itâ&#x20AC;&#x2122;s important to do the necessary research work prior to buying your dream home. You should have a look at several houses for choosing the right one. You should inspect the area and state of the house. In this regard itâ&#x20AC;&#x2122;s important to consider the points mentioned below:

Buyers: be careful Before buying a new house, conducting a thorough research on the house is very important. Whether the home is newly built, old or under construction, you should make an effort to do a good research. You should try to find out the potential problems of the house and any defects, if any. If you decide to buy an old house, there are bound to be some problems in the roof, structure, plumbing, gas or electricity. These can turn out to be risky and may lead to fatal consequences at times. Therefore, make sure that you check all these aspects meticulously.

How to Buy your Dream Home

The common features of these kinds of houses are mentioned below:

In case of the newly constructed homes, problems related to weather tightness, failure or some leakage can be commonly observed. Some other problems pertaining to material installation, supervision, designing and construction are also quite common. For all these reasons, inspecting the home thoroughly is considered to be of prime importance before buying a home. The houses that are mostly prone to ‘weather tightness failure’ are sometimes referred to as ‘Mediterranean style’.

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Low or flat pitched roofs.

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Deck areas on the other rooms.

Monolithic or textured claddings (a plaster-look). Enclosed handrails.

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The exterior of the house should be inspected to see that it has proper drainpipes, roof and cladding. See if there is any damaged paintwork, crumbling mortar, cracks, wood, holes and rotten wood.

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You should make sure that the cladding is not prone to leaking.

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You should also test the piles. You should also check the wooden piles.

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Use a ladder for checking the ‘ceiling space’. Check whether the ‘header tank’ is secure or not.

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Check the ‘power points’ with a ‘power point tester’. You should also check whether the insulation of the house is properly done.

Internal gutters. Curved heads of the window.

Before signing a purchase and sale agreement, it is necessary to take into account certain considerations:

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actually proceed with regard to the process of purchase. You should be confident about the fact that the house is not having any structural problem. You should consult your ‘real estate agent’ so that he browses through this checklist mentioned below:

Title Search. Valuation. Land Information Memorandum. Finance. Property inspection.

Checklist of property inspection Before appointing any building surveyor, you should do your own research. This may help you to choose from among several properties before you can

How to Buy your Dream Home

Inspections of the property After you inspect the house thoroughly, you should now take professional help to perform the next level of inspection.

a report regarding particular aspects of the house. Ensure the fact that the building inspector has enough scope of professional security in context of insurance for covering damages and legal costs. This will also protect the surveyors in case you claim they were negligent in doing their work. The 4 general areas on which inspection of the property should be carried out are mentioned below:

Who are the building surveyors? An experienced and qualified building surveyor should inspect your property thoroughly. It is important that the inspector you choose should have some ‘practical experience’ in the building industry. The building surveyors should have a thorough knowledge about how he should inspect a house. But prior to hiring a building surveyor, ensure that he possesses the required experience and qualification for drafting

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Significant defects. Considerable maintenance

Interior

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Exterior

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What does the building surveyor check? The inspection of the house will be carried out in those areas that are easily accessible. The areas covered by a normal inspection are mentioned below:

Roof space. Roof exterior. Subfloor.

Site

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Drainage.

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Other buildings like the garage.

Particular features of the house. Gradual deterioration.

Services.

Possibility of flooding. Condition of the site (i.e. retaining trees, slopes, or walls etc.).

How to Buy your Dream Home

What sort of defects will a building inspector try to locate? The kind of defects that the inspector will find is mentioned below:

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Damaged surfaces. Nails popping. Cracking. Leaks. Rot. Squeaky boards. Insect infestation. Uneven surfaces. Glazing. Sturdiness of handrails and stairs. Loose grouting, sealants and tiles.

The building inspector will also try to find out if the following things are functioning properly:

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Water outlets. Passive or mechanical ventilation.

You may also ask the inspector to give his observation about certain aspects of the locality and neighborhood such as:

Heating. Shaver sockets and RCDs (Residual current devices).

Survey on demand The building inspectors do not check certain areas of the house such as underground portions of the foundation, electrical installations, concealed plumbing and gas fittings. He will also not check the functioning of some appliances like heating units and airconditioning, spas and pools, chimneys and fireplaces, soft furnishings, alarm systems and appliances. He will only inspect the aforementioned appliances and areas only if you request him personally.

Meter box, switches and lights. Doors, joinery and drawers. Plumbing.

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Common property services and areas.

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Neighbors.

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Energy efficiency.

Soil toxicity. Views on privacy and sunlight. Noise from the railways, busy traffic and flight paths. Security in neighborhood.

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The property Report The report (written) given by the property inspector should include the information that has been mentioned below:

• The property address (the • • • • • • • •

property that was inspected) The person’s name who requested the report The name of the inspector or any other person present there during the period of inspection The experience and qualification of the inspector The weather conditions at the time of the inspection Date when the inspection was held Areas where the inspection was not done and the reasons behind it The list of faults or defects. A thorough analysis of the conditions of the house that

should consider the type of the house, the age and general expectations from other similar kind of properties. • Further recommendations of inspection by experts taking into account items like the electrical system, the drainage facilities or plumbing system etc. The property report cannot be considered as final in terms of inspection and survey. The report provides information about defects that are visible during the inspection. You need to decide whether you are going to purchase the property with any significant defects or not. The report on the property doesn’t provide you with the guarantee that the house has met all the requirements as per the Building Act. It may appear that the house may not comply with the building code and alterations may have to be done with the consent of the building owner.

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Conducting a self follow-up inspection After you have got the report you can conduct an inspection and prepare an assessment on the basis of this report. Look out for every defect mentioned in the report and decide whether you can live in the house along with these defects or you would need to repair these defects. You can negotiate with the seller for cheaper rates and if in this case; and if you find that the house has many defects you can decide not to go in for the purchase.

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Obligations regarding any special property or heritage property

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Compliances regarding the rules of the corporate bodies

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Costs involved in repairing the defects

Weather resistant problems in houses The “monolithic cladding system” houses are the most vulnerable to leaking. The style may be referred to Mediterranean style which usually has features of textured wall surfaces, generally prepared from sheets of fiber cement or polystyrene coated with plaster. Some of the typical features of this weather resistant style of houses are-

Things you won’t find in property report The inspection of the basic property does not cover the following areas:

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Title search

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Consent for building and code compliances

Homes with weather resistant issues

Issues regarding planning and resource

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Wall claddings that are connected to the ground

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The roofs are narrow or don’t have any eaves

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Recessed windows Multiple storied Designs features such as complex roof designs, solid balustrades, and envelope shaped structures.

How to Buy your Dream Home

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The balconies and decks overhangs from the wall

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Sub floor ventilation is inadequate timber floors

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Gutters are enclosed or concealed

The design may be inadequate to deflect the drainage water unless you it is made possible during the design and the construction. The structure of the house should be built with kiln-dried and untreated framing timbers, which can rot if they are not dried.

Inspection of weather resistant problems While looking for homes with similar characteristics of that of a Mediterranean style, it is then essential to conduct an “independent building survey”. The building surveyor must look out for water damages or signs of other defects. They generally make use of moisture meters by which they can identify the moisture problems and the water leaks. Although the meter doesn’t guarantee the existence of water

problem but it helps to trace the areas in the house which have high levels of moisture. Without depending on others, you can check out the problems by yourself:

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Unusual stains or rust on the exterior walls

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Cracks which create a passage that allows the rain water to get inside

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The exterior protective covering of the wall or wall cladding should not touch the ground, the balconies and decks so that the waters won’t soak upwards.

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agreements of buying, arranging and financing.

Getting the memo If you have located a property in which you are interested in, you need to apply for a memorandum on land information which would provide you with the following information on:

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Sewage drains, surface or ground water.

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Trust protection laws if the place is historic

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Plastic flashings and sheet metal over the doors and the windows

Considering special land features like flooding or erosion.

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The decks should be positioned below the internal floor levels

Rates outstanding (if any) of the land

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Certificates of the permit, consents and requisitions by the local council

More research and making the right move After you find the home, you need to check out the structures and the other important features. Your next step will be to check all the paperwork and the

Dealing with agents If you are a buyer, you should always be aware while purchasing a house. It is your duty and responsibility to verify and check the house to find whether there

How to Buy your Dream Home

are any defects. The real estate agent is not legally bound to point out the defects

There are certain legal requirements about the contract, so its better you discuss those issues with your lawyer.

Agreement of sale and purchase

three years according to the property valuation act.

Time to move

When you have decided to purchase the property, you need to sign the sale and purchase agreement and once the seller signs it as well, it will become a contract.

Check the conveyancing and title It is necessary to do a â&#x20AC;&#x2DC;title searchâ&#x20AC;&#x2122; before purchasing the property. You need to find the details of the present owner, the restrictions on the land or the building (if any).

Getting the right value of the property and they are not supposed to make any misleading statements about the property. So if you have any questions regarding the property clarify it with the real estate agent.

A correct valuation of the home will guide you on the existing market value of the property. It depends on the purchase price that is negotiated between the purchaser and the vendor. But if you are going for a mortgage, the bank may ask for the valuation of the property. The valuation ratings are conducted every

Before settlement, be ready with the insurance of the house and other formalities so that you can formally take a possession of the home. With your home being insured, the insurance company will now send the documents to your new address. So ENJOY YOUR DREAM HOME!!

How to Buy your Dream Home

Each one of us desires to own his/her home or rather than only dream of purchasing a home. Most of us also prefer to have our own apartment. An apartment may be classified as a property (townhouse, flat etc) which may be a division of a bigger development. You can buy this kind of property using the ‘strata title arrangements’. The significant features of “strata titles” include-

Purchasing an

Apartment

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Owners of personal units constitute a body for administering, controlling as well as maintaining common property.

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Individuals may own as well as enjoy the secured aspects of tenure in personal properties in a development.

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The Owners Corporation may impose permanent levies on the owners for enabling it to accomplish its functions properly.

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Benefits of purchasing an apartment There are certain advantages in purchasing an apartment. These are as follows-

• Price –Units are less expensive as compared to detached homes. This implies that you’ll have to invest a bit less for purchasing an apartment as compared to what you would have to spend for purchasing a detached home.

• Location –In recent times, apartments are usually constructed in better locations that are quite closer to the metropolitan centers. Hence, by purchasing an apartment you are in a way cutting short your transportation costs.

• Sense of community –This course is very positive for older residents as well as for members of single parent families. Some people don’t like to stay close to

their neighbors. Well, an apartment is the right choice for this group of individuals. Over and above, an apartment is much more secured as compared to a personal home.

Lifestyle patterns and Changing demographics In recent times, a significant change has been observed in the society. Come let us take a look at them-

• Lower maintenance costs – The cost involved in maintaining an apartment is much lower as compared to the cost involved in maintaining a detached home. Moreover, in case of an apartment, the owners’ corporation takes up the responsibility of maintaining the apartment.

Investment Returns You cannot always predict the probable investment returns that you are supposed to get after purchasing your apartment. Despite this fact, there are innumerable reasons regarding the enduring growth and development prospects of apartments. These reasons are as follows:

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An increase in the number of apartments

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The younger generations tend to settle down quite later in life

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First time buyers are in search of well-suited living options

How to Buy your Dream Home

Affordability First-time buyers prefer purchasing apartments. It is because; apartments come at a far affordable price as compared to general homes.

choosing an area that is overrun with apartments. In other words, try to choose an ideal location that has a little scarcity value. If you find an apartment with the above mentioned combination, then consider yourself really lucky!

Factors that need to be considered while choosing an apartment It should be remembered that no two units are created in the like manner. Hence, prior to choosing an apartment be sure to do the necessary research work. This section will make you familiar with certain issues that you need to focus on while choosing an apartment.

Rates of Owner occupation

Location Each one of us has our individual likes and preferences! As a result we choose an apartment according to our personal likes and dislikes. However, you need to follow certain general guidelines while choosing the apartment of your choice. For instance, while purchasing an apartment, be sure to purchase one that is near the CBD (i.e. Convention on Biological Diversity). Next, avoid

depressing. In addition to this, there are some risks involved if you choose to purchase an apartment. A significant reason that needs mention here is that overseas investors tend to invest in the construction of these apartments; and in the slightest economic tumble, these investors wrap up to cut down their losses. Therefore, ensure choosing a development that includes a wide range of dwelling types.

Dwelling kinds Some developments provide tens and thousands of indistinguishable “cookie cutter” apartments. In other words, you will have that some housing complexes have the same pattern of apartments. At times, residing in this type of an environment may turn out to be a bit

Determining the “rates owner occupation” for diverse developments and area may seem to be a bit difficult. However, conducting a good research will help you to determine the “rates of owner occupation” effectively. If the owner occupation rates are higher, then it is considered to be a good indication! It is because, it implies that buyers have purchased property based on their own likes and dislikes rather than purchasing the apartment merely for others to stay in it.

How to Buy your Dream Home

Local services Avoid choosing an inadequate location, simply for the sake of saving a few pennies. For instance, it would be unwise to choose a location which lacks the basic infrastructure and services. As mentioned previously, be sure to do a good research work prior to choosing an apartment. For instance, purchase an apartment that has retail complexes, public transport, entertainment areas and schools at a stone throw distance.

Find out whether the local area and development are aesthetically pleasing or not.

Check the floor space and how many bedrooms the apartment has Itâ&#x20AC;&#x2122;s true that you may choose an apartment according to your personal likes and preferences. However, it would be an ideal option to choose an apartment that has a larger floor space. If you are purchasing an apartment for investment purposes, keep in mind to choose an apartment that has more than one bedroom. In fact, by purchasing a two or three bedroom apartment, you can also attract prospective tenants.

Aspect & lighting Try to purchase an apartment that faces northwards. It is because, northward facing apartments are said to receive sufficient sunlight; thereby making your living environment all the more pleasant.

Parking Areas Having your personal garage or parking space, is an ideal way of avoiding much hassle! In fact, this also lowers your chances of friction with your neighbors.

Utilization of space

Landscaping and Streetscape Nobody likes to spend their days in noisy and unappealing surroundings. Hence, prior to purchasing an apartment, see to it that it isnâ&#x20AC;&#x2122;t positioned on a busy road.

Devote some time to evaluate how you should utilize the space in your apartment. A modern designed kitchen, sufficient storage areas are definitely big plus points.

Estimated costs A significant cost factor that needs to be considered while purchasing an apartment is the levy that is charged by your ownerâ&#x20AC;&#x2122;s corporation. Levies vary from development to development. For

How to Buy your Dream Home

instance, if the levy charged by the owner’s corporation is too high, then your monthly expenditure may exceed to a considerable extent. On the flip side, if the levy charged by the owner’s corporation is too low, then this may cause the owner’s corporation to impose ‘special levies’ at regular intervals to meet the cash shortage.

Prior to making a proposal It is quite astonishing to find that many people often ignore the aforementioned factors prior to choosing an apartment. However, this is indeed an important transaction that needs to be given prime importance. Be sure to identify all the related issues (the issues that needs to be taken into consideration while purchasing an apartment) so that you don’t repent after you have purchased an apartment. You may do this by going through the “due diligence steps” mentioned below-

Questions you should ask Before buying a property you should have a discussion with the seller or an agent who can provide you with some necessary information depending on which you can take the final decision. You should enquire thoroughly about the following aspects:

property by yourself to detect any problems or defects which may need a professional scrutiny. Then you can go for professional pest and building inspection. The second stage of inspection can be little expensive but it will save you from future expense that can be caused by any major fault left unnoticed by you.

• You should enquire about the past history of the development and the property. • Whether any major structural changes have been made to the property, if so, whether a proper permission has been obtained for doing so. • You should know why the owner is selling the unit and also how long did the seller(s) own/lived in that particular home.

Proper inspection of the property is necessary A proper inspection of the property that you are buying is necessary. This inspection should preferably be a twostep process. First you should inspect the

Obtain Strata Report When buying a property you are not buying any specific unit but a development that is maintained, controlled and managed by the corporation of owners’ (body corporation). So you should thoroughly check whether the development is in good monetary health and maintained

How to Buy your Dream Home

properly. You can get all the information by getting a strata report which contains following information:

If you have this information it can be easy for you to decide whether you should buy the property.

Are you ready to buy the property?

• The strata plan. • The levies that should be paid to

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If you have these information it can be easy for you to decide whether you should buy the property.

the corporation of owners.( Including the special levies which the corporation levied in the past) The by-laws which the residents should abide by. Insurance policies which are taken out by the corporation of owners. Any legal proceedings that involves the corporation of the owners. An expense list of the corporation of owners. An expenditure of past and future projects including any major repair work. A list of significant repair works that have taken place earlier. Complaints list of the owners. Records of disputes between the owners that have occurred earlier.

Though the process of buying a house and a strata unit is almost the same, purchasing a small unit is bit more complex and needs to fulfill few more legal steps. Managing finance for a small unit is difficult too. You should consult a mortgage broker or a solicitor who can guide you in arranging finance and clearing the legal procedure. Purchasing a unit is a major investment both for your lifestyle and future growth of your capital. This guide has tried to help you to bring your dream of a good home closer to reality.

How to Buy your Dream Home

How to reduce

Mortgage faster

A mortgage may be referred to as the greatest of all financial commitments that an individual is likely to make. You may have heard people saying… “I don’t own my home…instead the bank owns it!’ If you also belong to this group of people, then you should know how it feels while uttering the words that have been mentioned above! We all desire to own our home…or rather let us put it in a more realistic way…we all want to own our dream home! But, very few of us succeed in making this a reality! So what are the ways that will help you to pay your mortgage in no time? Is refinance a good option? Should you go for the additional features like “a line of credit” or “mortgage offset account” or “redraw facility”? Or will the “no frills loan’ fundamentals help you out? This section includes some important success factors that will help you to own your dream home sooner or later. In recent times, people prefer utilizing debt facilities for improving their financial condition. However, opting for this approach has its own pros and cons.

For instance, nowadays, home loans aren’t the same as they used to be decades ago. To begin with, nowadays, the property values are much higher as compared to our income. As a result people find it difficult to purchase a property. In addition to purchasing a property, there are additional charges as well. For instance, consider that after purchasing a house, you wish to renovate your bathroom or construct a second storey. So from where will you get financial aid? Taking into consideration, the aforementioned additional charges, you’ll find that by the time you end up repaying your home loan…you have spend almost the double of that you had borrowed! Hence, it would be advisable that you avoid any such situation that compels you to extend your home loan. Ensure keeping your expenditures to the minimum.

How to Buy your Dream Home

The Three Types of Debt Understanding the various kinds of debt may help you in identifying the benefits of reducing your mortgage.

• Bad debt- It is referred to as the worst type of borrowing. In simple words, it may be referred to as a borrowing for meeting our daily requirements such as purchasing clothes, etc.

• Good debt - It can be referred to a borrowing that enhances personal wealth when assets such as shares, equity, land or real estate etc.

double of what you had borrowed as home loan. Hence, you need to pay off your mortgage at the earliest, in order to lower the overall interest bill.

Hidden Treasures Let us assume that you have got your dream home! Now, your aim lies in repaying the mortgage at the earliest. Well, there are certain basic tools that will help you in your endeavour! These tools or rather virtues are within you! Discipline and sacrifice are the two tools or virtues that will help you to pay off your mortgage faster.

• Own Home debt- When a person borrows money for purchasing “an appreciating asset”, but fails to claim a tax discount on the rate of interest he pays, then it is known as “own home debt”. Home mortgages belong to this category. It is because the interest levied on the home mortgage isn’t tax deductible. As a result, you may at times have to pay almost the

However, none can compel you for doing so; these virtues should come from within.

You can repay a loan after every fifteen days, rather than waiting for a month to do so. This will help you to pay off your mortgage faster. However, you need to make the some sacrifices in this regard. A majority of us are still not familiar with what sacrifice actually means. It is because; we have been getting all that we desired without having to crave for them. With time, we have experienced a considerable improvement in our “standard of living”…we purchase products or items that appeal to us, without giving a second’s thought! In other words we have forgotten the difference between what we “want” and what we really “need”. For instance, kids nowadays can’t imagine their lives without cell phones. On the other hand, in earlier times (say before forty years or so) television was considered to be a luxury. Most of us prefer leading a luxurious life; we purchase whatever has been recently launched in the market. Whether we need them or not, purchasing them is our passion. You may have heard people

How to Buy your Dream Home

saying… “Wow what a lovely cell phone…I’ll surely purchase it” or “did you see that iPod…its amazing! I’ll surely purchase it!” In fact, some of us even outsource some of our domestic duties like ironing or cleaning!

Now you may ask “what’s the harm in leading a luxurious life?” Well, the answer is simple “NOTHING”…but only if you are able to afford it! But what about those, who cannot afford to lead a luxurious life! Or rather let us put it in this way…what about those who have just purchased a house and need to pay off the mortgage faster? Well, these people should try to change their luxurious lifestyle as it may help them pay off their mortgage faster. Making frequent (fortnightly) or larger loan repayments is an ideal way to clear of your mortgage payments. Now you may ask “how can I make frequent or larger loan repayments?” The answer is simple you can do so by curtailing some of your non-essential expenditures. It’s true, cutting short some of your expenses may add up to your savings.

“Meet with a good financial planner to evaluate all pros and cons of going ahead”

Prioritize your needs You will be able to make sacrifices to clear of your loan quickly when you weigh the returns against consumption.

A little effort on your part may help you to reduce your mortgage. To be more specific, you need to prioritize your needs and wants. Ask your own self, “should I dine out every week or should I restrict it to two days a month?” or “should I purchase the newly launched cell phone or should I stick to my old phone?” These are only a few examples, to make you understand the importance of saving. Curtailing the non-essential expenses will help you to save more money. As a result, you will be able to repay your mortgage faster. Repaying a mortgage is a time consuming process…it may take years to repay a mortgage. Some may even need a time span of twenty years or so to repay their mortgage.

How to Buy your Dream Home

Hence, this doesn’t imply that you will deprive yourself from your cherished things for twenty long years. As mentioned earlier, you need to, identify your needs, prioritize them according to their importance and act accordingly.

Cost vs. Price Keeping a track on the actual cost of products and services is an ideal way to curb non-essential spending. For instance, a pizza may cost around $5, however, you should earn about $9.34 ( taking into consideration 46.5% tax rate?) to afford it. If you consider the consumables from this viewpoint, it may help you in determining their true value...i.e. whether you really need them or whether they are worth paying for. The act of “giving up” something precious in order to get something more worthy or valuable is known as sacrifice. In other words, it persuades you to save money (taking into consideration the perspective of the book) so that you can pay off the mortgage faster and own your dream property.

By now you may desire to pay off the mortgage at the earliest! For this, your first step lies in accepting the thought of making a sacrifice. Once, you accept this thought, you’ll find it easier to reduce the amount of debt. In other words, make sacrifices today for the sake of attaining prosperity tomorrow. Ask your own self “what do I actually want in life?” As mentioned earlier, prioritize your needs according to their importance. If you are somewhat content with your home, but is still investing money on it, simply to compete with your neighbors, then it is high-time that you refocus on your needs and prioritize them. In other words, make it a point to plan your budget and act accordingly, if you want to reduce your mortgage. Budget planning is indeed a simple procedure; however most of us often overlook this important concept! By budget planning, you can keep a track on your expenses. Once, you identify them you can curb the unnecessary expenses. You will find innumerable online budgeting tools that are fast and simple-

to-use. You may also consult a financial advisor for this purpose. If you want to reduce your mortgage, ask your own self: “what should I sacrifice that will help me to pay off my mortgage faster?” Can you distinguish between your needs and wants? Well, in simple words, you need to bring some changes in your lifestyle that would help you to spend less and save more.

Discipline If you have already made up your mind to make sacrifices in order to reduce your mortgage, it implies that you are a step further to reach your goal. But whether this sacrifice of yours will turn fruitful or not, depends upon how disciplined you are. Discipline is all about taking action or not taking inaction. Some people are more disciplined as compared to others. This is in a way same as some people are more cautious consumers as compared to others. They know that there are some external factors (e.g. advertising) that can sway an individual. Specifically speaking, skilled marketers know how to

How to Buy your Dream Home

advertise and influence customers. Hence, if your vision is not clear and strong, chances are quite likely that an advertiser may influence you. Will your actions or rather habits help you to create your desired vision? Keep in mind, that your habits or actions will stipulate an outcome, hence be sure that the stipulated action is an intended one! We as human beings do have our own free will, as well as the aptitude to modify our behavior. It may be difficult for us to depend solely on disciplinary skills, devoid the appropriate structures (we’ll discuss it soon!). The consumer-centric world is based on our incapability to be disciplined; hence we should make a rigorous effort for following the right path…the path that will bring us close to our goal…our goal to pay off the mortgage at the earliest!

The right structure In recent times, you can purchase products and services with the click of a mouse. You don’t have to move out of your house to purchase them; rather you

can purchase them online! The more you look for cost-cutting avenues, the more the advertisers work upon introducing lucrative offers. Hence, you need to be disciplined and try best on your part, not to get swayed by lucrative offers. The structure through which your cash flows is considered to be a “make or break” factor in the game of “mortgage reduction”. You need to structure or organize your finances adequately. This approach may help you to pay off your mortgage faster.

A closer view at the right structure Let us consider that your monthly income is $3000 and your monthly expenditure is $2999. Hence, after deducting the expenses from the overall income the remaining amount comes up to one dollar. Now what will you do with this amount? You may either spend it or deposit to your account. But, very few of us would utilize this amount for paying off our mortgage!

However, things may be different for a person who intends to utilize this amount (the remaining dollar of course!) for paying off his mortgage. Consider the same scenario, a person has a monthly income of $5000, and after deducting the overall expenses, has very little left in his hand. However, instead of spending this money or depositing it to the bank, this person will utilize the same for paying off the mortgage. Making extra payments on frequent basis is considered to be an ideal way of reducing your mortgage.

How to Buy your Dream Home

Line of credit There are innumerable ways for setting up the aforementioned structure. For instance, if you borrow a sum of $500,000, then your line of credit will amount to $50,000. The principal amount in this case, will be $450,000 and interest at which you’ll have to repay the loan would be kept at minimum. A credit card also forms an essential part of this structure. Let us now concentrate on the working of this structure. Most part of salary goes into repaying your mortgage. This lowers the interest rate and loan amount that you’re paying. Thus this approach is somewhat beneficial in this aspect.

beneficial for only some people. A responsible and knowledgeable financial adviser may make you familiar with this structure in a better way. But, this structure may be first implemented on an experimental basis. You may go in for this structure, only if it is confirmed to be appropriate.

this isn’t true…i.e. there isn’t much difference between our income and expenditure; hence the “line of credit” structure is simply incredible in theory. Interestingly, the “line of credit” also helps you to reduce your mortgage! As a result you can use your funds for other purposes like investment.

Cash-based structure

This structure is believed to have the potential of paying off a mortgage faster! In rare cases, it has been observed that people, who had to repay the mortgage amount within 25 years, had end up paying the amount within eight to nine years.

It’s true that most of us find it difficult to resist the temptation of purchasing a ski boat, traveling to our favorite holiday spot or renovating our bathroom when we have spare money on “ the line of credit’’ for spending.

However, buyers should keep away from this structure. It is because; this structure needs great diligence and hence is

Over and above, there should be a huge difference between your income and expenditure. However, for most of us

It’s true that the “line of credit” is immensely helpful, but only quite a few people succeed in making it work. Instead, most people find it easier to adhere to the cash-based structure. It is because the cash-based structure provides the feedback almost instantaneously. To be more specific, this structure provides you an instantaneous feedback every time you overspend. Let’s consider that you dine out at a restaurant and the bill amounts to $220. However, you can afford paying much more than that. Now, do you think that you have crossed your budget? Well, the answer is as simple as “how will you know?”…there is no budget after all.

How to Buy your Dream Home

Now let us consider the same scenario, but from a different perspective. Consider that you dine out at a restaurant and the bill amounts to $220. However, you have only $210 in your account. You use a debit card or a check for paying your bill. Now, what do you think…” have you crossed your budget?” Well, certainly you have! In the first case, you didn’t have an idea whether you have crossed your budget or not. You’ll come to know about this only a year later, when the yearly transactions are in front of your eyes. However, in case of the cash-based structure, you’ll get the feedback almost instantaneously.

Strategies to reduce your mortgage We have already discussed about the significant strategic concepts regarding mortgage reduction. Now, we will be taking a look at the strategies that helps to lower your mortgage.

Setting up the right structure 1st option: Set up a structure where your monthly income will be directly transferred to the mortgage account. This lowers the interest rate that you need to pay on the mortgage debt. 2nd option: Set up a structure in which your savings, current as well as mortgage accounts is organized separately. Your savings help you to “offset” or “reduce” your mortgage. The structure of your debt affects your overall financial situation. You may consult mortgage brokers who will tell you how to manage your debt efficiently. You may also consult a financial adviser who would help you out with your total planning as well as cash flow management.

Consolidate the expensive debt Prior to making extra payments to pay off your mortgage, it would be better to take a look at your financial picture. You may also consult a financial adviser for this purpose. Ensure consolidating the expensive debts.

Fortnightly vs. monthly repayments If you pay off your mortgage on a weekly or fortnightly basis, then you will have to pay lower interest rates. For instance, if you make payments on monthly basis, then you will have to make twelve payments in a year. On the other hand, if you make payments fortnightly, then you’ll have to make thirteen repayments. It is because there are twenty six fortnights in one year. This “extra” payment system helps you to save more.

Re-financing Do a good research work for finding out the best suitable rate of interest. Keep in mind that the underlying rates matter, after fees are taken into account which is known as the comparison rate at times. Ensure looking for lower rates of interest (for repaying the loan). It is because you may have to pay extra amount due to this increase in the rate of interest. Everything depends on your financial condition! It is because at times the additional features may help you to attain your investment and tax

How to Buy your Dream Home

objectives. You may also consult a financial adviser to know which financing type would be the most suitable for you. You may acquire termination fees for paying off your present loan at the earliest. However, these fees may be higher in case of “fixed rate loans”. You need to pay the legal fees of the lender getting your property discharged and for costs associated with the new loan that includes, stamp duty, application fees etc. If you are thinking about refinancing, you should keep a track of your fees and costs. You may even consult a mortgage broker for understanding the refinancing process in a better way. He will let you know whether you should go for refinancing or is it better to stay with your present lender. You may choose either of the following...i.e. you may either go in for a refinance or stay with the existing lender. You may also renegotiate with the lenders for a more suitable deal. In other words, irrespective of the situations, the same rules are applicable for the aforementioned consequences. If you save a few dollars, then it may add to

your savings. On the other hand, if you fail to make the necessary sacrifices, then neither of the tips and tricks (to pay off your mortgage faster!”) is likely to work!

The time has come… If you follow the information included in this section, then it is hoped that you can pay off your mortgage within two months. You don’t have to wait for twenty five long years to pay off your mortgage! However, be sure that selfdiscipline and sacrifice are the two essential keys in this long journey. It has been mentioned over and over again that you can always consult a financial adviser who would work out a suitable budget for you! Last but not the

least; you need to be focused on your goal (your goal of paying off the mortgage at the earliest!)!

How to Buy your Dream Home

The need of

Remortgaging

The process of shifting the mortgage from a lender to the other for getting a more suitable deal is called remortgaging. In this regard, there is no need of shifting your house. Amidst several reasons for remortgaging, the most important is saving money. Remortgaging really saves a lot of money. Most of the people consider their mortgage to be the ‘biggest’ financial commitment. And the fact is that if you can remortgage your largest debt, you could really save a lot. You need to make use of some skills and knowledge for remortgaging so as to save money. Like many other borrowers, if you are having the SVR (standard variable rate), which is the ‘bog standard mortgage’ of the lender, then you must understand that you are paying a huge amount of money. The lenders depend on loyal customers for finding the prospective offers that are attractive in the ‘best buy tables’ & allure some new borrowers towards it. So what should you do in order to pay less?

Let’s consider a case to understand how you can save money. Suppose you are having a remortgage payment as $100,000 at 6% interest. You will have to repay the amount in 25 years. Now, if you pay at 5% interest for 25 years, you will be able to save around $5,000. If you keep on switching the interest rate, then you could save double than this amount. A time can even come when you would need not shift the mortgage to some other lender for getting a more suitable deal. Before moving anywhere else, you can challenge your present lender for giving a brand new offer. You should always remember that though you can save money by remortgaging, you have to pay a certain price for it. You might need paying a fine for leaving the present lender, a penalty for joining a new one & also face some legal bills. If you take help of any mortgage broker for getting a ‘new’ deal, you may be charged a higher amount. Therefore, it’s best to look for those brokers who would not charge an amount so often. It does not imply that you should not remortgage.

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However, it certainly implies that it’s best doing the calculations before remortgaging.

Other causes Remortgaging does not only mean saving money. It means something more than that. It is also done to get a mortgage that is not only suitable for you but is also suitable for your financial situation. Some more causes of remortgaging are discussed below.

The worth of the property Even in this disturbed time, the value of the houses has gone up significantly from their actual price. Remortgaging may help you in capitalizing on this.

Other debts charging high rate of interest If you are having many outstanding debts, you should add these debts to the home loan. After you pay the rate of interest for the mortgage, the amount of debt becomes half.

Pack up Suppose you are moving upwards on a property ladder & in this regard need borrowing some more money. In this case, you need to understand few things. There are some portable mortgages. In other words, you are able to transfer the mortgages to some new property. But along with this, in case you also need borrowing more money simultaneously for buying an expensive house, you should go for a ‘new’ mortgage.

Different mortgages Suppose your income has risen or you have got some money due to inheritance. Now, you want making some extra amount to the mortgage, but the present deal would not allow you in doing so. You may also have to ignore a payment. Changing jobs, beginning the process of education, going to travelwhatever may be the reason, some mortgages are there that would allow you to ‘miss’ the payments.

However, this is just not an easy thing to do. You should always keep in mind that you are securing the money on the home. Therefore, if you can’t repay your mortgage, your home will be at risk. Moreover, if you have borrowed more money & used your cash for paying off the bank loan or credit card, you will have to pay an interest on this extra amount of money till the time you are having the mortgage.

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When you are not Remortgaging

In this context, do your necessary homework so that you can move from this bad deal quite easily.

If you have a small mortgage

Though you can save money by remortgaging, however, many people should not remortgage.

If you are lucky You might be involved in such a better deal from which you would never like to move out. However, taking things for granted is not a wise decision. Things may change at any point of time and you may need to remortgage. Therefore, do not expect that things will turn out as per your wish.

If you are unlucky On the other hand, you may be involved in such a bad deal for which you have to pay a fine in case you are leaving it. Therefore, if your deal is really terrible itâ&#x20AC;&#x2122;s better to move out from it as early as possible so that you can avoid giving higher fines.

This is another category that should be carefully considered before remortgaging. After your loan has been reduced to a particular amount, you need not change your lender. This is because the money already saved by you in all probability would not exceed the cost. Moreover, some lenders would not even take such a small mortgage. The borrowers who are supposed to end the mortgage term might also consider it to be quite expensive. So they will also try to avoid making such deals.

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Kind of Mortgaging

On the other hand, with an ‘interestonly’ mortgage, you only need to clear the interest & make an investment for generating sufficient cash in order to make the actual payment of the home. Some mortgages are also available that are suitable for the novice buyers. In this case, the new buyers only need to pay off the rate of interest for some years after which the amount gets converted to a ‘repayment’. But always remember one thing that if you start paying the mortgage soon, you will end up clearing the mortgage very soon.

Selecting a mortgage is a very difficult and at the same time a crucial task. There is a never ending choices of mortgage from which you have to choose the one that suits you the best. While choosing your mortgage, you should first figure out the reason for your remortgaging. If you can find this out, it will help you in understanding why you need a new loan.

Good side of interest-only mortgage

Let’s first understand the difference between a repayment mortgage and ‘interest- only mortgage’. Until & unless you are having a very strong reason, you should go for a repayment mortgage. This ‘option’ guarantees that you’re really paying back some debt amount each month.

The ‘interest-only mortgages’ are not always bad, however they certainly involve some risk. As far as finance is concerned, risk is an important factor that needs to be considered. Risk means to take a chance. The age old problem about ‘interest-only mortgages’ is that people who opted for them did not realize the risk involved. Now, this had some serious consequences.

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The fact is that the investment you used for making the ‘interest-only mortgage’ might raise and in that case you not only get the house but also have to pay an extra amount for it. Another consequence could be the investment may fall and in that case you will have to make up for the shortfall.

Fixed rate of Interest This type of mortgage is quite simple. It has a fixed rate of interest. The general rule is, if the fixed rate of interest lasts for a long time period, the rate will become more expensive. Some lenders allow you to fix for 10-15 years; however these kind of pricey deals are not popular.

Pros: Certainty is the most important advantage of this mortgage. You always know the exact amount of the mortgage. Your payments would not rise irrespective of the rates.

Cons: the ‘cap’ has a tendency of being set at a high level. The initial rate is usually higher than the normal fixed and variable rates.

Cashback

Cons: The rate of interest is much more than the discount products. Even if the rate of interest drops, the payment will not fall. There are some ‘special offer deals’ that you should consider:

Capped The ‘capped mortgage’ is a combination of fix rate and variable rate. The rate that you pay goes in coordination with the base rate. However, a cap or ceiling is there that provides some protection. The maximum level set by the cap will not allow the payments to rise further. These mortgages are popular when the people are scared that the rate of interest may soar. Pros: as the rate of interest fall, you benefit significantly. You are also protected in case the rates rise.

In case of a ‘cashback mortgage’, the lender gives back some cash beforehand. The amount could also be as high as 5% or 10% of your borrowed amount. However, the cash back mortgages have a high rate of interest that are higher than the standard charge or loans you pay; only if you wish repaying or switching your loan in a given time period, generally 5 years. In other words, what the lender gives is actually recovered from you in due time.

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Pros: You can get lump sum cash.

NEW & WHIZZY

The additional money that floats in the account is an overpayment and this means that you require clearing your mortgage faster. You can also add an extra savings for further reducing the balance.

This is a very new kind of mortgage. It lets you use the current account balance and savings for reducing the amount that you have to pay. Some of these mortgages are discussed below:

Pros: if used in the right manner, someone who is spending less money than he is actually earning every month will pay back his mortgage more quickly. He will thus save a lot of money.

Cons: You have to pay for the mortgage in some other ways.

CAM (Current Account Mortgage) This mortgage combines both the current account and the mortgage amount. You thus get the total balance. Therefore, if you are having $ 2000 in the current account & $90,000 as the mortgage, then your overdrawn amount is $88,000. Thus you have a small debt after you actually pay off your salary. The debt begins to show when you pay the bills & make other payments in the month. You need to make a normal payment each month that will pay off your mortgage over an agreed time period.

Therefore, if you are having a mortgage as $150,000 & savings as $15,000, you just have to pay an interest on the difference of $135,000.

Cons: You need to take care of your money in an efficient way. From the psychological perspective, do you want to remain overdrawn permanently? I guess certainly not. The rate of interest charged on the â&#x20AC;&#x2DC;current account mortgageâ&#x20AC;&#x2122; is also much more than on the normal deals.

Pros: You are overpaying the mortgage each month & as a result you will clear it faster. This will also help you save a huge amount of money. As your debts and savings are maintained separately, you can easily keep track your money. It is also tax efficient particularly for the high rate taxpayers.

Offset Mortgages

Cons: The rate of interest is more than that of the direct normal mortgages. Therefore, you need to keep good amount of savings for making the extra payments. If you have to spend the avings for some reason, the mortgage would become much more expensive.

In this case, rather than having all the money at the same place, the offset mortgage keeps the mortgage, current and savings accounts in different places. However, the savings are also used here for reducing or offsetting the mortgage.

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Other important Considerations After choosing the right kind of mortgage, you should also consider some other important factors. These factors are discussed below;

Is the ‘mortgage’ available for the re-mortgages? Though it may seem quite obvious but all the deals can not be re-mortgaged.

Can you get money from the lender as per the cost of the property? Most of the lenders can only give you a certain sum of the home’s value. This value is called LTV or ‘Loan to value ratio’. This LTV amount can be somewhat around 95%. This is a kind of boost for those who are remortgaging so that you possess more of the house and put down more that will further help you to borrow less. This in turn offers a better LTV ratio.

Does a lender charge regular interest? This makes great difference to the ‘amount’ that you pay off. Daily interest implies that the money you have to pay is reevaluated each time when you pay off. When you have to pay a lesser amount, the rate of interest also gets reduced significantly. With an annual rate of interest, you do not get any benefit in this 1 year before this time period gets over.

Is there anything called ‘early repayment charges’ for an extended period? If you have set a ‘deal’ for a given time period, you should try to figure out what occurs when this time period is over. Most people tend to believe that they have to pay a penalty and lenders commonly use this as an opportunity to levy earlier charge rates for the extended period.

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What will happen if you have to move the house within a mortgage term? Portable mortgages are available in the recent times. Therefore, even if you are moving a house, you do not need to go for any new deal. However, if the loan needs to be extended, while moving the house, you can go for remortgaging. If this is important for you, you should know what you may do & you may not.

How to Buy your Dream Home

Pay for Remortgaging Though you can save a good amount of money by remortgaging, yet you need to pay for it in certain areas. However, you should also understand that your saving should always be more than your expenses otherwise it makes no sense in moving further.

Some of the lenders would pay either less or all your cost of remortgaging. However, never expect that you will get a high return against this. Therefore, though it involves lesser expenses, you also save less. From a broader perspective, fees can be categorized into two types: cost involved to join a new lender & cost involved while leaving the existing lender.

Fees for leaving If you are remortgaging within a discount deal or fixed rate period, you will require paying an ‘early’ charge for repayment. This charge was previously called redemption penalty. The movement is like a ‘sliding scale’. Therefore, if you make the deal at an early phase, you will have to pay more for it. Suppose on the fixed rate for 3 years, the interest charged on the loan is 3% only if you redeem your mortgage immediately. The interest keeps on decreasing with time.

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Fees for joining

The cost will vary significantly based on the lender and the value of the property. However, the safest thing to do is budgeting at minimum $250.

Here, you will need paying the arrangement fee. This arrangement fee differs greatly from one lender to the other. It’s been increasing for quite some time now. The safe thing is budgeting for somewhere around $300 to $500. You can add this amount to the loan. This can seem lucrative for a short-term. But the question that you should ask yourself is that do you really wish paying interest on this fee until you are having the mortgage.

Remortgaging also includes ‘legal fees’ even when you do not move the house. Some lenders do pay the legal fees where as some do not. In either case, you need to take help of a solicitor under the approval of a lender.

If you remortgage for moving the house, you will need to pay to the ‘government’ a stamp duty land tax. Even if the lender covers the legal fees, this fee would not be included there. No ‘stamp duty’ is levied on properties that cost below $120,000. You will need to pay somewhere around 1 percent that costs in between $120,000-$250,000. Properties valuing $500,000, asks for a stamp duty of 3%. You need to pay a stamp duty of 4% for properties that value more than $500,000.

A ‘reservation fee’ can also be charged by some lenders for securing the fixed rate. This amount is non-refundable & approximately costs in between $100 to $200. You should always check the amount before you agree to any fixed rate. You also need to pay ‘valuation fee’ for being able to survey a property. This actually verifies things like: whether the property actually exists or not & that it provides enough security to the lender against the loan.

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What is the worth of it?

The process

First and foremost, you have to add all the costs. The lender needs to give you a ‘redemption court’ which will specify all those fees that you need to pay. You should also add up the broker fees, arrangement fees, legal work cost etc. Make a total of all the costs.

Going Solo If you know how to go about the remortgaging process, nothing can really stop you from doing it yourself. However, you should keep in mind that if you choose such a mortgage that does not suit you; you will only have to blame yourself.

After getting the total of all the costs, you should now calculate your savings. You should try to get the quotes of your new ‘mortgage payment’. For calculating your savings in the upcoming two years, the new mortgage payment (per month) should be multiplied by 24. You should then multiply the ‘current payment’ by 24 & subtract the amount from the previous total. In this way, you will get to know how much you can save per month.

You can get help from the Internet about various products & thus compare the offers.

The route of advice A ‘mortgage market’ is very large & can change so quickly that any specialist may really create a difference. However, you should be very careful while choosing the brokers. All the ‘mortgage brokers’ do not have an honest intention.

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There are two most important questions that you should ask your broker

•

Is the broker ‘whole of market’?

Whole of market means, that the broker would look at every mortgage lender of the UK so that he /she can get the best pick for you. If the broker cannot do so, you should try to avoid him.

•

How will the broker make money?

The broker can earn money from two sources. These sources are discussed below: Commission: the brokers get a ‘procuration fee’ from the lenders. This amount ranges in between ‘0.3%-0.5%’ of the value of the mortgage. This amount can rise till 1% for the ‘subprime’ mortgages. Fees: The brokers may charge a fee from you directly. Any reputable broker should not charge anything above 1.25%

and this rule (charging fees)??? also applies for the ‘sub-prime’ customers. You should not approach any broker who charges more than this amount. In the past, the fees were charged after you pay off the mortgage term. However, at present, the brokers inform you about the charge and they can recover the same from you at any time they like during the process. However, charging the amount is a legal matter, you should avoid any broker who charges you before the process of mortgaging is over. This can lead to problems later on.

•

There are brokers who take commission and charge fees. However, an independent broker is a person who charges only fees and do not take any commission. Practically this does not happen. In reality, the broker charges both the fees and the commission & do not rebate the commission.

The high ranking brokers The smaller brokers are carefully selected by asking the two questions already mentioned above. They usually provide good service. On the other hand, the experienced brokers sometimes offer more research sources, market power and influence..

The tricky aspect The most suitable option to choose brokers is by talking to them. In this way, you can also explore different possible options of remortgaging. You can also learn different ways of saving money through this method. The experienced brokers charge a fee only after the completion of the mortgage process. You may also visit a lender.

How to Buy your Dream Home

The competitive aspect Recently the ‘mortgage rates’ have become very competitive in nature. For this reason, some brokers and lenders are trying hard to make money from somewhere else during the process of mortgaging. Therefore, be ready to face the competition on the areas mentioned below:

‘Higher lending charge’ An insurance policy that some lenders compel borrowers to adhere to when they borrow for a house at a LTV (Loan to Value ratio) of something more than ‘90 percent’ is called ‘Higher Lending Charge’. A higher lending charge protects a lender in case a borrower cannot pay his mortgage & if his property is supposed to be ‘repossessed’.

How to Buy your Dream Home

However, this insurance policy is too expensive. They only protect the lender & so it’s better to avoid it. Those people who remortgage usually have a higher LTV than the new buyers. Therefore, you might not get affected, but you better be careful.

MPPI (Mortgage Payment Protection Insurance) MPPI is often referred as ASU (Accident Sickness and Unemployment Insurance). It will cover the mortgage payments in case you are sick or meet any accident. However, the MPPI policies usually have many complex exclusions- like they do not cover the self-employed individuals, MPPI might have a low pay out, it takes a lot of time for the policy to mature & the payments might only ‘last’ for a single year. For all these restrictions, MPPI might not be the right choice for you and more so when you are not having the income of your partner or dependent. It would also be not suitable if you are not having your savings. It can only cover the share of

your bills for few months. Even when you make up your mind to go for an MPPI, it is highly possible that you will be getting a ‘cheaper deal’ by making a good research.

Income Protection Life is very unpredictable and nobody knows what is in store for them in future. You may suddenly lose your job due to some accident or injury or may suffer from a prolonged illness and find yourself in the midst of a financial crisis. In this situation only an Income Protection policy can help you and your family to fulfill your financial needs, and give you an opportunity to get some extra income as well to start your life afresh. It will also help you to pay off your loan, mortgage and other payments. Unfortunately, if you lose your job and you have an Income Protection Policy you can get a regular monthly income which is tax free until the policy term gets over or you get back your job. This policy is also beneficial for self employed persons.

Before buying the policy, you should have a close look at the terms and conditions of the policy so as to get assured that they will pay you at times of your need. Do not go for too much cover or insure your gross income. In the normal course, you should get an insurance cover up to 50% -75%. Insurers will reduce the pay off amount, the moment they come to know that you are earning more money than what you used to earn when you were working. Cost of a policy varies depending on the benefits being provided. However, a number of facts such as the amount of money you want as your income replacement, the time when the protection started, width of the cover, and terms of the cover determine the cost of insurance.

Life and Disability Insurance You may not realize the urgency of a life insurance until you require it. A number of people die every day all over the world. Many of them suffer premature death and that too without any insurance cover. After their death most

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of their dependents have to go through a lot of financial crisis. If you do not want your family to be a sufferer after your death, you should buy a life insurance policy. Security of your family becomes your top most priority if you live abroad. In that case you can buy an international life insurance. There are few insurance providers who provide international insurance policy which unlike the local insurance will cover your every move whether you are moving from one country to another for business purpose or coming back to your native country to visit your relatives. A life insurance can therefore help you to secure the lives of your family members.

Building insurance

cancel the old insurance policy in case you are choosing a new policy.

You should be very careful about those deals that compel you in buying ‘building insurance’ via your lender. These deals quote a reasonable amount of interest in the first year, but that may not happen in the subsequent years where they may coerce you into paying enhanced premium rates so long as the mortgage continues.

Other insurances Will you purchase a music system from the person who cleans windows? Certainly not! Therefore, you should not assume that only because you have purchased a financial property from someone, you can also buy other insurances from him. You should never expect that you will get all the good deals from him. Like you did in case of MPPI, you should also do a good research. In some areas, you will be able to save 50% on life cover that is offered by the broker or lender. You should

End result After you have finished remortgaging once, you should not think that your entire job is done. You may miss the best deals if you are not aware about them. If you wish to save money, you need to keep a constant watch on the ‘best buy tables! Particularly, if your time of mortgaging is for 2 years, you should make an effort to clear it before the due time ends. This will also help you in saving money.

How to Buy your Dream Home

Conclusion Well you have come to the end of this book or rather it can be called a new beginning! After reading this guide things perhaps appear to have become real and much ‘realty’. The word ‘mortgage’ doesn’t seem so terrifying after all; because you must have realized by now that this guide has highlighted some real effective strategies to clear of your mortgage for a price, i.e. your newly owned home. In simple terms this guide prepares you for battle. As a soldier trains and equips himself well before plunging himself in the battlefield, so does this book trains and equips the buyers substantially so that they can combat, not only combat but combat confidently and well! A substantial amount of buyers have a kind of phobia against the legalities and formalities that one has to go through in the process of purchasing a new home. This guide has simplified the process and has tried to make the buyer conversant with all the possible terms and processes related to purchasing and owning a new home. It has depicted a step by step, stage by stage process that enables the buyer to identify his position and location in the home owning process and thus enables him to act appropriately. If you’ve read this book for information or for becoming conversant with the home owning process, whatever may be the intention – you may have realized by now that it is worth taking up some hassles in view of an eternal gain, i.e. your home and in this regard you are the best advisor, financer and architect. Once you discover this, the battle is half won. Victory is just a few steps away! So, identify yourself in the realty contour and don’t give up because it is commonly said “when the going gets tough, only the tough get going.” The fact that you have read this book itself proves your intentions and desires. Now just put whatever you’ve read and acquired from this book into practical use and see the results. You should reap a hundred folds! To conclude, this book somewhat sends across silent whispers in disturbed waters - “The experts are here!”

How to Buy your Dream Home

Glossary

Buying a home can be really an exciting venture but in some cases it seems daunting even if you are experienced with it. To buy a home, you may have to come across several legal terms and issues like mortgage options, loan applications, credit reports, points, contracts, change orders, appraisals, inspections, walk-throughs, warranties, settlement sheets, recording fees, escrow accounts, taxes insurance, etc. You may come across many words and terms, which you may not have ever heard before. However, it is very necessary that you should know and understand these important terms otherwise you may face trouble during the dealings and wonâ&#x20AC;&#x2122;t understand that which is written in the contracts while going through it. This glossary has been prepared to help the buyers understand the terms used in the real estate and in mortgage marketplaces.

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A Annual percentage rate: The APR includes the broker’s fees and other credit charges which is necessary for a borrower to pay Appraisal: An analysis done by professionals to estimate the value of the property Appraiser: The professional who conducts appraisal Annuity: Yearly or regular interval minimum payments Application fee: The fee charged by a broker or mortgage lender while applying for the mortgage; it is also known as processing cost. Arbitration: The process by which disputes are settled by a mediator or the third party. Asbestos: A kind of toxic material previously used in fireproofing or housing insulation. Now they have been banned since the material is proved to cause certain lung disease. Assessed value: The value calculated on the property for the purpose of taxation. Assessor: The official who determines the valuation of the property for assessment of tax

Asset: Something which has a monetary value and is owned by a company or a person. Personal properties, stocks, real estate properties, mutual funds all are considered as assets. Assignment of Mortgage: The document which proves ownership transferability of a mortgage from one individual to another. Assumable mortgage: It is a mortgage loan which can be assumed the buyer after the sale of a house. Assumption: It is the agreement by which the homebuyer who takes the responsibility of repaying the existing mortgage from the home seller. Assumption fee: The Lender charges a fee from the buyer who has assumed to repay the mortgage of the home seller.

B Balance Sheet: the financial statement which shows the assets, the liabilities and the net profit for a particular assessing year. Balloon mortgage: A mortgage based on 30 year of amortization which includes monthly payments; here the balance may remain unpaid after 5 or 7 years and

this type of mortgage provides with an option for modifying the interest rate according to current market value. Bankruptcy: a legal declaration of being unable to pay the debts, it hampers the credit history of an individual and his money borrowing abilities. Before tax income: The annual calculation of income before deducting taxes; it is also known as “gross income”. Biweekly payment mortgage: mortgage payments made every two weeks instead of months Bona fide: this term means “good faith” without any fraud Bridge loan: it is a short-term loan obtained on the basis of the borrower’s current house, which is usually for sale and the sale proceeds are utilized for a new house. It is also known as “swing loan”. Broker: the individual who act as a middle man between the users and the providers. Building code: it refers to the local regulations which states the standards and requirements for construction and maintenance of buildings. Buydown: it is a kind of negotiation where the property developer or any

How to Buy your Dream Home

third party allows a reduction in the interest rates to reduce the monthly payments of the borrower. Buydown account: a type of account from where the monthly payments of the mortgage are made.

C Cap: it is the limitation on the amount of the interest rate which is subjected to variation. It is necessary for an adjustable rate mortgage. Capacity: the ability of a borrower to make mortgage payments at a specified time. The capacity depends on income, savings and assets of a borrower. Cash out refinance: it is a type of refinance transaction where the borrower receives more funds than the amount he requires for repaying the existing mortgage. Certificate of deposit: a document, which serves as a proof of deposit, it is issued by the bank or financial relevant financial institutions; it acts as a promise note by the bank to return the deposit with a certain interest rate and within a specific time period.

Certificate of eligibility: a document, which certifies the eligibility of a senior citizen for a mortgage loan Chain of title: the records of all documents which are transferred to the new owner during the transaction of the property. Clear title: the ownership without any defects, liens or any legal bindings Closing: after the transaction process is completed that includes signing of the mortgage documents, transferring ownership, disbursing funds etc. Closing costs: the fees related to the transaction of mortgage loan which are paid by the buyer Collateral: an asset that forms a guarantee for loan security. In loan mortgage, the collateral would be real property or house. Commission: the fee for the services performed which is generally based on the percentage of price of the items sold. Commitment letter: the letter in which the lender makes an offer regarding mortgage, repayment terms, and rate of interest Conventional mortgage: the loan which is not guaranteed or insured by the government or housing departments.

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Convertible ARM: The ARM or the adjustable rate mortgage which permits the borrower to have a fixed rate of interest under certain conditions Credit bureau: the company or the organization that keeps a track of consumers who make use of credits. They collect the information and form a credit report. Credit history: the information contained in the files of the credit bureau, which includes the consumerâ&#x20AC;&#x2122;s debt records, and about the payment status of the debts. Credit score: the numerical value which indicates the ranking of the credit report of a borrower.

D Debt to income ratio: percentage of gross income in a month after paying the housing expenses, car payments, alimony, child expenses, installments and credit cards bills. Deed: a legal document where the title of the property and its ownership are mentioned. Deed-in-lieu of foreclosure: it indicates the transfer of title from the borrower to

How to Buy your Dream Home

the lender for satisfying the mortgage debts and for avoiding foreclosures. Deed of trust: the legal document where the borrower transfer the title of the property to a third party as a security to the lender. When the loan is fully paid, the title is transferred to the borrower again. Default: inability to fulfill the legal obligations is known as default in real estate. Apart from the failure of paying up the financial obligations, he/she may also fail to perform certain actions or services. Delinquency: when the due payments are not made in time, it is referred as delinquency. Depreciation: the value of the house declines due to changes in market conditions or due to lack of maintenance

E Earnest money deposit: the deposit which proves that the borrower is interested to buy the home. Encroachment: intruding into another’s property without the permission or right Encumbrance: claim on any property like easement, mortgage or lien

Equity: The difference between the market value of the property and the claims held against it. Escrow: an item, money or documents generally deposited with the third party which are being delivered only after all the conditions in the contract are fulfilled. Escrow account: an account opened by the mortgage servicer in place of the borrower for paying taxes, premiums, insurance and other charges. Escrow analysis: the accounting performed by the mortgage servicer for determining the exact balances of escrow account Eviction: the lawful proceedings of removing an individual from any real estate property Executor: an individual whose name is in the will and can administer the estate after getting the approval from the probate court.

F Fair market value: the price of the property that would be transferred between the willing seller and the willing buyer where each of the persons has

reasonable knowledge and they are not under any compulsion to sell or buy. First mortgage: the mortgage which has a primary lien against the property First time home buyer: an individual who has no ownership interest in the main residence within the first three years of the purchase of the property. Fixed period adjustable rate mortgage: the adjustable rate mortgage or ARM has a fixed rate in the initial period of three to ten years and that can be adjusted after every six months, or annually or after certain period of time. It is also called “hybrid loan”. Fixed rate mortgage: The mortgage that has a fixed interest rate which doesn’t change in the entire loan period. Foreclosure: it is a legal action which is taken to terminate the ownership rights of a home and this happens when the homebuyer cannot repay the mortgage loan or is otherwise a defaulter in terms of the mortgage payments. Forfeiture: Due to breach of legal obligations, there is a loss of property, money, privileges, or rights.

How to Buy your Dream Home

General Contractor: an individual who works on many aspects like ordering supplies or schedule works, apart from supervising the contract project or for any improvements. Government mortgage: it is a mortgage loan which is approved or guaranteed by the federal government of the country for housing development or improvements. Gross monthly income: the income, which an individual learns before taxes or any other deductions. The income may include self-employed income, rental income, child support, retirement benefits, payments for public help etc. Ground rent: when any payment is made for the use of the land and when the land is titled as a leasehold estate. GEM (growing equity mortgage): this is a fixed rate mortgage when the monthly payments are increased as per the agreement.

Hazard insurance: the insurance, which compensates for any physical damage done to the home from any climatic or manmade disaster Home inspection: an inspection conducted officially for determining the property’s condition. The inspection evaluates certain aspects like heating and cooling systems, plumbing, foundation, roof, wiring, and pest infestation. Homeowner’s insurance: the policy which protects the homeowner from any natural calamities or any damage of the personal property. Homeowner’s warranty: a type of insurance which is offered by the seller for meeting up expenses of the home repairs and fixtures for specific time period. Homeowner’s association: an association of the homeowners whose basic motive is to ensure provision and maintenance of the building and to provide common services to the residents. HUD-1 Settlement Statement: this is the final list of the closing cost of mortgage

transactions. It provides sales price and down payment. Hybrid Loan: the ARM that offers fixed rate for a certain period of time (may be for 3-10 years or annually or for a specific period).

I Index: the number used for computing the interest rate for ARM. This index is generally indicated as a percentage or a published number. Index is subjected to change due to any cap. Individual Retirement Account (IRA): a kind of plan for deferred tax payments generally for the purpose of retirement benefit.

L Lease-Purchase Option: this option is occasionally used by the sellers for renting a property to the customers who can buy a home after a specific time. LIBOR-Index: index which is used to determine the interest rate of ARM, this is based on the rates of the international banks.

How to Buy your Dream Home

Lien: a charge or a claim on a property for debt payments Lifetime cap: in case of ARM, lifetime cap is a limit on the amount on which the monthly payments or the interest rates can rise or can reduce over the entire period of the loan. Loan-to-value ratio or LTV: relation between the property value and the loan amount is LTV, which is generally expressed as the percentage of the property value. Low-Down-Payment Feature: an important feature of the mortgage which helps the buyer to purchase a home for a low down payment.

M Margin: a certain percentage that is added to the index of the ARM for establishing interest rates on each adjustment dates. Market value: the current market price of the home which the purchasers should pay. There can be some appraisals for the home for determining the market value.

Maturity Date: the due date of the mortgage loan when the full settlement of the mortgage should be done. Merged Credit Report: the credit report, which is issued by the credit reporting company, generally contains information and reports about two or three credit bureaus. Modification: any change in the terms and conditions of the mortgage loan is modification, this include change in interest rates, loan term or loan balance. Money Market Account: an investment type where the funds are invested in short term securities. Mortgage: it is a type of loan where the home forms as a security of the mortgage. In few regions mortgage also refers to some document you sign.

N Negative Amortization: when the loan balance increases with the addition of the unpaid interest to the loan balance Net Monthly Income: the net income after paying taxes, this you generally receive by a paycheck Net Worth: the value of the assets of a company or an individual which includes

total cash obtained by deducting liabilities.

O Open house: when the real estate agent of the seller offers the house in the open market to purchase Owner financing: it is a type of transaction where the property seller provides a part of the finance to the buyer for purchasing a property. Owner-Occupied Property: a property which serves as a primary residence of the borrower.

P Partial Payment: the amount of the payment which is less than the fixed monthly payment on a mortgage loan. Payment Cap: for ARM or for other variable loan rate, payment cap is a limit on the amount of the payment for increasing or decreasing rate of interest in one specific period. PITI: it is the acronym for four main components of a monthly mortgage payments, the four components are Principle, Interest, Taxes and Insurance. Predatory Lending: it is an abusive lending practice, in which the mortgage

How to Buy your Dream Home

loans are approved to those people who donâ&#x20AC;&#x2122;t have the financial abilities to repay.

R Rate Cap: the limit on the interest rate amount on an ARM which can increase or decrease during an adjustment time period. Rate Lock: it is an agreement where the interest rate is locked in or guaranteed for a specific period of time before closing. Real Property: anything like land which remains affixed to the ground, it can also be trees, minerals or walls. Refinance: obtaining a new mortgage because all the sale proceeds are used to pay off the previous loan.

S Securities: it is a financial form which is owned by a shareholder or a stock holder or any government bonds. This is a legal proof of the ownership of the security. Sale-Leaseback: a type of transaction in which the buyer gives back the property to the seller as a lease for a specific time period.

Secured Loan: a loan, which is secured by properties like car, jewelry and house. Settlement: the process of a complete loan transaction when the documents are signed, funds are disbursed and the property is transferred to the new owner.

T Third-Party Origination: sometimes the lender uses another party for underwriting, funding, closing, packaging or for mortgaging loan. Trade Equity: when any asset or any real estate is given to the seller on behalf of the down payment

U Underwriting: this is a process of loan approval which involves evaluating the property, the borrowerâ&#x20AC;&#x2122;s credit and his ability to pay off the mortgage. Unsecured Loan: loan which is not supported with any securities or collaterals

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W Walk-Through: a common and important clause generally mentioned in a sales contract, which allows the buyer to examine the property before the contract is finally signed.