Four ways to avoid risk when buying Hamilton property this Autumn

Posted on 27/03/2019 by Andrew Morris in Finance, Mortgage Broking, News
Andrew Morris
Andrew joined Sinclair Wilson in May 2017 as Mortgage Broker, having spent the past 10 years in the banking industry. With a small business background - in hospitality, no less...

As we touched on in last week’s post, right now, it’s widely considered to be a buyer’s market across the Western District’s property sector. 

Yet, because ‘a buyer’s market’ means property prices can be susceptible to change, buyer confidence can be shaky.

However, the possibility of paying too much for your perfect Hamilton property is not the only risk a home buyer or property investor can face when market conditions are undergoing significant change. Other pitfalls to be wary of as you scan the traditionally-busy local Autumn market are outlined belo

1. Pre-approvals are more important than ever

Having a pre-approved loan is like a show of confidence: it means a lender has assessed your financial situation and determined how much you can borrow, and there’s a good chance they’ll provide a formal loan approval later, when you find your perfect Hamilton property.

Banks have been tightening their lending criteria and this is one of the things influencing falling property prices. Fewer loans are being approved, and the size of loans being approved has also reduced. Home buyers who could easily get finance a year ago, are now facing much more rigorous tests to get loan approval.

Under no circumstances should you place a deposit on a property until your loan pre-approval is confirmed – otherwise you could risk losing your money.

2. Get lender approval on your property selection

Did you know that a lender can reject the property you want to buy, even if they have given you a pre-approval on a loan big enough to buy it?

There are several reasons why. The main is negative equity risk.

Negative equity is when the amount you have borrowed becomes more than the market value of the home. There is a risk this can occur due to falling home values. For example, in 2018 many off-the-plan homes were unexpectedly valued at less than the contract price upon completion and some buyers were unable to get the loan approval they needed to complete their purchase without topping up their deposit.

To avoid a negative equity situation, a deposit of at least 20% is recommended. If buying off-the-plan, it is also recommended you insert a clause in the sales contract confirming the final price will not be more than the market value of the property upon completion.

The other reasons a lender may not approve your loan is if the property is in poor condition, in a remote or unpopular location, or is too small (less than 52sqm).

The best way to avoid any of these factors impacting a lender’s final blessing of your loan application is by getting us to confirm you have chosen a viable property before putting down your deposit. Both myself and Bob McMillan have many years experience in this industry, so can ensure this process is quick, efficient and delivers the information you need to know

3. Ask more questions

Research is key when buying in a falling market. Ask more questions about the underlying factors that drive capital growth, to ensure the property will hold its value, and, importantly, that you’re not paying more than you should. Start by checking local employment rates, the property’s proximity to schools and bus stops, or other important local amenities, like whether there is a local partk nearby, it’s easy to access services such as the local pool or sports facilities, or even if it’s close to local shops.

An even easier way is to contact us. We have access to reports that include information on the state of the local rental market, population growth, even what’s been the most popular types of houses sold in the past 12 months.

4. Keep your broker in the loop!

Remember, it’s a buyer’s market and with careful research you can buy with confidence. If you want to secure a bargain this Autumn, then call us now to confirm your borrowing capacity and get pre-approval on a loan. In addition to helping to protect you from risk, a pre-approval will help you move quickly when you find the right property and negotiate strongly to get the right price.

Call us for a chat about your plans today.