When getting ready to buy property, there are many things to keep track of as settlement approaches. An important consideration is what you will need in terms of insurance – admittedly not the most exciting part of buying a new home, but one which can save you money and stress in the future.

Why lenders often require insurance

While not a legal requirement, insurance is often required by lenders, and they may want to see your policy before either the exchange of contracts or ahead of the settlement.

As the lender has a stake in the property during the life of the loan, they will want to know should the property be damaged or destroyed, if any large insurance claims are made, and if your insurance lapses.

Types of insurance

There are various forms of insurance relating to your property, these include:

• Home or building insurance – to protect you against damage to the property (such as due to an extreme weather event like fire or floods).
• Contents insurance – to safeguard you against theft or accidental damage to your belongings.
• Lenders Mortgage Insurance (LMI) – to cover the lender should you default on your repayments (note: LMI is a one-off payment by the buyer, not the lender).
• Landlord insurance – to protect your property if you are renting it out.
• Mortgage protection insurance – to cover your mortgage payments in case you or your partner become unemployed, seriously ill or die.

Home and contents insurance

Home and contents insurance, is often what buyers think of when it comes to getting insurance.

There are two main types of home insurance: sum-insured cover (which means the insurer will pay for repairs or a rebuild up to an estimated amount you specify in your policy) and total replacement cover (which means you will be covered for your home to be repaired or rebuilt as it was without you having to set a specific sum-insured limit).

Total replacement cover is more expensive and not all lenders offer it, so keep that in mind. As for contents insurance, you tend to be covered for the replacement value of your belongings.

According to statistics from Finder in January 2023, 60% of survey respondents have some form of home insurance policy. An interesting finding was that only 43% of respondents with home insurance said that they fully understood their home insurance policy. While 48% said they partially understood it, 8% didn’t understand the benefits and inclusion of their policy.

It’s important to know what you are covered for, such as which type of event. Home and contents insurance don’t cover everything, so check the exclusions – these might be a house left unoccupied that is then damaged, doing renovations, any existing damage and damage caused by pets.

You can usually request additional insurance, for example, covering high value items such as expensive jewelry or fixing that hole in the wall, so it’s worth checking what is included in your policy and whether it’s worth paying extra.

Do you need insurance before settlement?

As mentioned above, some lenders will ask to see proof of insurance before any contracts are exchanged. In some instances, the lender will ask that your insurance be effective from the date you sign the contract or before the loan becomes conditional.

Depending on which state or territory you live in, you may be responsible for damage to the property as soon as contracts are exchanged. Here is a list on each area’s requirements:

• ACT, TAS & SA – the buyer is responsible for damage to the property as soon as contracts are exchanged.
• NSW & VIC – the buyer is responsible for damage to the property on settlement.
• QLD – the buyer is responsible for damage to the property from 5.00pm the next business day after the contract date (before settlement).
• WA & NT – the buyer is responsible for damage to the property on whichever comes first: either the date the whole purchase price is paid, or the date the buyer is entitled to or is given possession of the property.

Please feel free to contact us if you have any questions about this or any other mortgage related matter – we are here to help.

If one of your goals is to buy your own home, then 2024 might just be your lucky year. It will see the launch of the Federal Government’s exciting new Help To Buy scheme.

Over the next four years, this initiative aims to help up to 40,000 low- and middle-income Australians finally buy a place they can call home. Here’s how it’s going to work.

Bringing home ownership within reach

The Help To Buy scheme is a shared equity scheme between home buyers and the Federal Government. It allows the Government to contribute to buying your home, so your initial and ongoing costs are significantly reduced.

The Government will contribute up to 40% of the price for a new home and up to 30% for an existing home. Your upfront costs are further reduced because you only need a minimum 2% deposit, with no lenders mortgage insurance payable, and you will only make repayments on your share of the mortgage. It’s all geared to get you buying a home sooner rather than later and making your ongoing repayments more manageable.

What’s more, the government will not charge any fees or interest on their investment. It’s like an interest-free loan that you only pay back if you sell. Plus, you can start buying back the government’s share after the two years.

Making sure you’re eligible

To be eligible, you must be an Australian citizen, at least 18 years of age, and with an annual income of not more than $90,000 for individuals, or $120,000 for couples.

Applicants don’t need to be first-home buyers, which is different to existing schemes. However, you must live in the home you buy, and you can’t own any other land or property in Australia or overseas while in the scheme.

Even though the required minimum deposit is just 2%, you must still be able to finance your share of the loan. This includes proving you can pay for all up-front mortgage costs like stamp duty and legal and lender’s fees. You will also be responsible for ongoing costs associated with the property such as maintenance, rates, strata, and utility bills.

All this is in line with the normal checks on a borrower’s suitability that your mortgage lender will carry out. And with our long list of lenders, we can make sure you are paired with one that suits your circumstances and is approved for government schemes.

Some things to keep in mind

Help to Buy will only be available once the state you live in has passed legislation supporting the scheme. But don’t worry, all Australian states and territories have agreed to pass legislation in early this year.

10,000 places every year will be allocated per capita across the states and territories, with approval given on a first come, first served basis. This effectively means there are caps on the number of approvals in any given area, which makes it very important to get your application in as early as possible.

Currently, the maximum eligible home price varies from state to state, and between capital cities and regions, and are expected to be in line with the similar schemes such as the First Home Guarantee. For example, the property price cap for Hobart is $600,000 with $450,000 for the rest of Tasmania. In Sydney and regional NSW cities, it’s $950,000 and $750,000 across the rest of the state.i

Say the government takes out a 30% share ($300,000) in your $900,000 home. If you sell, you’ll have to repay the $300,000 plus 30% of any capital gain the property has made. How any property improvement costs will be factored into this calculation will become clear once the state legislation is passed.

Helping you into your new home

Since you can’t apply until the Help To Buy scheme is approved by the State Government, we’ll keep you up to date with what’s happening as more information becomes available.

In the meantime, we can work with you to discuss your eligibility for this upcoming scheme and existing initiatives, and can help you start the process to prepare to buy in the future.

Stay up to date with what’s happened in markets and the Australian economy over the past month.

Cooling inflation and a strong economy with relatively low unemployment has sent investors back to Australian shares towards the end of January.

The lower than anticipated inflation figures fuelled optimism at the end of the month, for the possibility of earlier cuts in domestic interest rates.

Click here for our February update video.

Please get in touch on 03 9723 0522 if you’d like assistance with your personal financial situation.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

It’s challenging buying property. It’s tough scraping together a deposit, it’s not easy dragging yourself to one open-for-inspection after another (especially if you’ve been doing it for a while!), and it can be soul-destroying being pipped at the post when you have set your sights on a particular property.

Then there is getting the finance arranged – faced with a bewildering array of options and a load of paperwork to complete, the process is yet another part of home buying that can be hard yakka.

Let’s look at the ways we can lighten your load when it comes to the finance side of things, so you can focus on the search for your dream home – and the purchase.

Crunching the numbers

Many people put the cart before the horse when they start looking at property. It’s easy to get excited and start looking around as soon as you’ve decided to bite the bullet and buy, but unless the numbers have been crunched and you know how much you can borrow, you might be wasting your time.

That’s where a broker comes in handy as we can review your situation and let you know how much you are likely to be able to borrow. We’ll take the time to get to know you and your situation. Our depth of experience means we can assist even in complex circumstances. For example, you may not have a steady income or be running your own business, you may have an unusual employment situation, a poor credit history or other issues that might make applying for a loan more difficult.

Then once we’ve crunched the numbers, we can start looking at your finance options.

Making sense of the options

When it comes to loans, there is a myriad of products to choose from, which can add up to one big headache unless you have someone to help guide you in the right direction.

We can do all the legwork for you, to compare the different loans available. We have access to more deals and lending products than if you went to a single bank or provider, and we will outline the pros and cons of different loan options and work with you to determine the right finance option that suits your circumstances.

We can then help you obtain a prequalification so you have a clear picture of your borrowing power and can commence negotiations with confidence.

We are also experts in this area so we are up to date with all the government support currently available to home buyers and can help you make sense of all the schemes out there and decide if you are eligible and if so, which would be the best schemes to assist you.

Support through the process

The paperwork for a loan application can be complex and there is a danger of your application being rejected if you get anything wrong. That’s a situation you want to avoid, as every rejected loan or credit application puts a black mark on your credit history which can make it even harder to get a loan in future.

We can work with you to address any issues with the paperwork before you get to the application stage to maximise the chance of your application being successful.

It can be good to have an expert on your side through the process. We have relationships with all the lenders we work with and can get involved to negotiate on your behalf or do what we can to ensure an application is processed promptly.

Seeing it through to the end – and out the other side

We’ll be with you through the entire process and celebrate with you on the other side. We are here for you at any point even after you’ve purchased, should you wish to review your loan or the terms of your loan, or look at refinancing.

Please feel free to contact us to talk about any aspect of your finance requirements – we are here to help.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

Integrity One Facebook

This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.