Buying a home in New South Wales (NSW) can be an exciting and rewarding experience. From the bustling city of Sydney to the picturesque regions, NSW offers a diverse range of housing options to suit all lifestyles and budgets.
With its strong property market and attractive coastal living, it’s no wonder that buying a home in this beautiful state is an attractive prospect for many.
This guide will help you get ready to buy a house in NSW and is divided into three sections:
- 1. Being Financially Prepared To Buy
- 2. Grants And Schemes Available For First-Home Buyers In NSW
- 3. Finding The Right Property
- 4. Steps To Buying A House In NSW
How To Be Financially Prepared To Buy A Home In NSW
An important first step to buying a home in NSW is determining how much you can afford.
- Most people need to borrow to buy their homes. This means getting approved for a home loan from a lender.
- Before you start looking for a property, get pre-approved for a mortgage so you know how much you can afford.
Why Should I Get Pre-Approved To Buy A Home In NSW?
- You demonstrate to the seller that you are ready to proceed, especially when competing with other buyers for the same home.
- You will better understand the mortgage application process
- You’ll know exactly how much you can afford to invest.
How Much Deposit Do I Need To Buy A House In NSW?
You need a deposit of at least 5% of the property value to buy a home in NSW. This does not include the other costs associated with buying, like stamp duty, registration fees and valuation fees.
For most 5% home loans in NSW, you must pay Lenders Mortgage Insurance (LMI). LMI is applicable when borrowing more than 80% of the property value. There are ways you can avoid paying LMI.
What Are The Costs Involved In Buying A House?
We will divide the costs associated with buying a house in NSW into two categories:
1. Upfront costs: These expenses must be paid before or at the time of purchase.
2. Ongoing costs: These expenses must be paid regularly after purchasing a property.
|Upfront Costs||What Is It?||Ongoing Costs||What Is It?|
|Deposit||A small portion of the purchase price that must be paid upfront to secure the property||Mortgage repayments||Regular repayments that are made for taking out a mortgage|
|Stamp duty||This is a tax on the transfer of property ownership.||Annual council rates||In NSW, council rates can be paid in full annually or in quarterly instalments.|
|Legal fees||The costs paid for engaging the services of a solicitor or conveyancer||Monthly utilities||The ongoing costs for water, gas, electricity and internet|
|Pre-settlement inspections||The costs incurred for building and pest inspections to ensure the property is structurally sound and free of major pest infestations||Maintenance and repairs||Regular maintenance and repairs to keep the property in good condition|
|Lenders Mortgage Insurance (LMI)||If your deposit is less than 20% of the property value, you need to pay LMI.||Insurance||Home and contents insurance to protect the property from damage or loss|
Tips For Getting Approved For A Home Loan
- Budget for the costs associated with buying and owning a property in NSW.
- Save at least a 5% deposit
- Use the postcode calculator to find out if lenders accept the location.
- Maintain a good credit score
- Have stable employment and income
- Calculate your borrowing power
- Understand your Debt-To-Income (DTI) ratio
Grants And Schemes For First-Home Buyers In NSW
The NSW Government has various grants and schemes for first-home buyers in NSW. To qualify for them:
- You must be purchasing your first home in Australia.
- You must be at least 18 years old.
- At least one of the first-home buyers must be an Australian citizen or permanent resident.
- You and your spouse or partner must never have owned or co-owned residential property in Australia.
- You and your spouse or partner must never have received an exemption or concession under the scheme to which you are applying.
- You must move into the property within 12 months and live there for at least six continuous months.
Here’s a summary of the grants and schemes available for first-home buyers in NSW:
- First Home Buyers Assistance Scheme
- First Home Owner Grant (New Home)
- First Home Buyer Choice
- First Home Guarantee
- Regional First Home Buyer Guarantee
|Details||First Home Buyers Assistance Scheme||First Home Owner Grant (New Home)||First Home Buyer Choice||First Home Guarantee||Regional First Home Buyer Guarantee|
|What is it?||A full exemption or concession on stamp duty||A grant of $10,000 when you buy or build your home||A choice to pay either an upfront stamp duty or an annual property tax||A guarantor scheme where the government acts as a mortgage insurer and guarantees up to 15% of the property value so that borrowers do not have to pay Lenders Mortgage Insurance (LMI).||A guarantor scheme where the government acts as a mortgage insurer and guarantees up to 15% of the property value so that borrowers do not have to pay Lenders Mortgage Insurance (LMI).|
|What is the property price threshold?||The value of the property is less than $800,000||The purchase price must not exceed $600,000
For house and land and owner-builder, it cannot exceed $750,000
|A new or existing home with a value up to $1.5 million
Vacant land with a value of up to $800,000. You intend to build your first home.
|The value cannot exceed $900,000 if you’re buying in capital city & regional centres.
The value cannot exceed $750,000 for the rest of the state
|The value of the property in regional centres cannot exceed $900,000 and for other regional areas, it cannot exceed $750,000|
|What type of property can you buy?||An existing home
A new home
A vacant land you intend to build a home
Substantially renovated homes
It is not available for established homes
|An existing home
A new home
A vacant land on which you intend to build
|An existing home
A vacant land and separate contract to build a home
|An existing home
A new home
Family Home Guarantee
- First Home Guarantee
- Regional First Home Buyer Guarantee
What sets this scheme apart from the other two are:
- The Family Home Guarantee helps single parents with children as dependants buy an existing home or build a new one with a deposit as low as 2%.
- It’s available for Australian citizens who are single parents and either first-home buyers or previous homeowners who do not currently own a home
- The annual taxable income must not exceed $125,000
Shared Equity Schemes Available In NSW
A shared-equity scheme or arrangement is when an equity partner acts as both the lender and investor in a property. The equity partner can be the lender or a third-party investor, such as the government.
There are two shared equity schemes available in NSW:
|Details||Help To Buy Scheme||Shared Equity Home Buyer Helper|
|Who is it for?||Low- to middle-income earners who don’t own property||A single parent of a dependent child
A single person aged 50 or above
Key workers who are first-home buyers (Nurses, midwives, paramedics, teachers, early childhood educators and police officers)
|What is the minimum deposit required?||2% of the purchase price||2% of the purchase price|
|What is the income cap?||$90,000 for singles and $120,000 for couples||$90,000 for singles and $120,000 for couples|
|What Is The Maximum Allowable Value Of The Property?||$950,000 for capital city and regional centres and $600,000 for the rest of state||$950,000 in Sydney, Newcastle and Lake Macquarie, Illawarra, Central Coast and the North Coast of NSW
For other parts of NSW, the maximum property value is $600,000
|When is it available?||From July 2023||From 23 January 2023|
Finding The Right Property
Now that you know how much you can afford, you need to find the right property to buy. Before you look for the right property, make a list of must-haves and nice-to-haves. This helps you narrow down the necessary features to buy a home within your budget.
There are many ways you can research to find the right property in NSW:
- Talk to local real-estate agents and gather as much insight as possible.
- Take a walk or drive around the area.
- Talk to the local residents and find out how they like (or don’t) like about living there.
- Visit the NSW Government’s website to find out if there are any developments planned.
- You can use the NSW Valuer General portal where you can search land values and property sales information for free.
- Get information online about current property listings, median prices, auction clearance rates and common property types.
- Research information on recent sale prices for similar properties to ensure the seller is not underquoting the property.
- You can also attend auctions in areas you’re interested in buying. This paints a realistic picture of how much properties are selling for compared to their advertised prices.
Inspect The Property
If you’ve narrowed down the list to a few properties, go for a pre-purchase inspection to know the condition of the home you’re buying.
While online and virtual tours are available, these might not show an accurate picture of the property. That’s why it’s important to get the right people to do this part for you. You can either ask a trusted friend or family member or engage the services of a buyer’s agent.
If you go for an in-person inspection, take your time to get a thorough look at the property. Let the seller know beforehand if repeated visits are required.
These are some things you can note when inspecting the property:
- Lift carpets and rugs to see if they’re hiding dampness or rot.
- Try the taps to see if hot water is running properly.
- Try the light switches.
- Look at the fuse box and check the circuitry age and if there is an Earth Leakage Safety Switch.
- Smell the property. The use of strong fragrances could mask unpleasant smells.
What Are The Steps To Buying A House In NSW?
After finding the right property, you start the process of buying a house in NSW. We’ve outlined the seven steps you take when buying a home in NSW:
- Step 1: Take the help of a licensed solicitor or conveyancer who will help you from making the offer right through to settlement.
- Step 2: Make an offer to buy a house
- Step 3: Review the Contract of Sale
- Step 4: Exchange the Contract of Sale. This is when you pay the deposit and stamp duty
- Step 5: Conduct a pre-settlement inspection
- Step 6: Prepare for settlement
- Step 7: Move into your new home
Making An Offer To Buy
There are usually two ways you can buy a house in NSW:
- If it’s a private treaty, you make an offer directly to the seller or their real estate agent
- If it’s through auction, you need to register as a bidder. If your bid is successful, you must sign the sale contract and pay the deposit upfront.
What Is The Process Of Buying A Home Through A Private Treaty?
In a private treaty, the home is listed on the market for a set price with no deadline for sale to be complete. Here’s how the process of buying a home through a private treaty in NSW looks like:
- Ask the seller for the Contract of Sale and have it reviewed by a licensed conveyancer or solicitor.
- Organise a pest and building inspection
- Get pre-approved for a home loan
- Make an offer for the home
- Negotiate the sale price
- Once the negotiation is complete and the seller accepts your offer, you exchange the Contract Of Sale
What Is The Process Of Buying A Home Through Auction?
Before you bid at an auction, make sure:
- You are pre-approved or unconditionally approved to know how much you can borrow
- You have money to pay the deposit
- You have inspected the property
- You have reviewed the contract with your solicitor or conveyancer.
During an auction, interested homebuyers place their bids for the property. An auctioneer controls the process until the highest bid wins. If you are the winning bidder, you sign the Contract of Sale and pay the deposit immediately after the auction.
Understanding The Contract Of Sale
Before you make an offer on the house, you must review the Contract of Sale.
A Contract of Sale is a legal document with terms and conditions of the sale and information about the property and land. You have to ask the seller for a copy of the contract and ask your solicitor or conveyancer to review the:
- Deposit amount and due date
- Settlement details
- Title documents, including zoning certificate and drainage diagram
- Special conditions, including if the home will be vacant or tenanted
Exchange The Contract
The final step is to exchange the contract and prepare for settlement. Before exchanging contracts, you need to
- Complete all relevant property inspections and checks
- Review and discuss the Contract of Sale with your solicitor or conveyancer
- Confirm financial agreements
Get a thorough inspection of the property before you sign. A pre-settlement inspection can be done a week before settlement to ensure that since you first exchanged the contract, everything is as it should be.
The two major inspections that take place in a pre-settlement inspection are:
- A building inspection that checks for structural integrity and soundness
- A pest inspection that examines the property for the presence of termites and pests.
Exchanging the contract legally completes the property sale process. The seller has accepted your offer and both parties have signed the Contract of Sale. At the time of exchange, you need to pay the deposit and stamp duty of the home you’re buying.
Private treaty sales in NSW have at least five business cooling-off period after the contracts are exchanged. During this period, you can withdraw from the sale as long as you’ve given notice. There are penalties for withdrawing from the contract, and it’s worked out as a percentage of the sale price.
Properties bought at auction do not have a cooling-off period.
The final step of the home buying process in NSW is the settlement.
Settlement takes place around six weeks after contracts are exchanged.
During settlement, the rest of the sale price is paid and you are the legal owner of the property. The legal documents of the house are transferred to your name.
At the time of settlement, your lender will disburse the funds from your home loan, and you will receive the keys to your home. Congratulations, you are now the owner of your home in NSW. Get ready to move into your new home.
Frequently Asked Questions About Buying Property In NSW
Get unconditional approval for a home loan before you sign and exchange the Contract of Sale.
It’s best to get pre-approved before you start looking for property
That depends on the situation. Sometimes, it can take a few weeks to find the right home, while others can take time to get approved for a mortgage.
The typical mortgage process usually takes six weeks.
In NSW, you are responsible for any damage to the property from the settlement date. However, you can insure the property before settlement, especially if the seller does not have a current insurance policy.
While it’s not compulsory to get a home and contents insurance, some lenders will require you to insure your property.
Unlock Your Dream Home With Us
Purchasing a property in NSW can be an overwhelming experience, but it doesn’t have to be! A mortgage broker can be your secret weapon to simplify the process.
With a broker on your side, you’ll be able to secure a mortgage that fits your budget, lifestyle and goals. Unlike going it alone, mortgage brokers can use their established relationships with lenders to negotiate better terms and rates, saving you money in the long run.
So, if you’re ready to take the leap and buy property in NSW, Home Loan Experts’ mortgage brokers are here to help. Call us on 1300 889 743 or enquire online today.