Purchasing - finance and insurance

The first question we usually ask when assisting someone buying a property, whether residential or commercial, is - do you have the money available to purchase, and if you don’t are you able to borrow to finance the purchase?

Finance Pre-Approval

In today’s housing market it’s helpful if you have obtained pre-approval from a bank confirming how much they will lend, as this speeds up the final approval process. However the pre-approval will be subject to at least two conditions:

a) Approval of the property as security, which means the bank needs to confirm the property is suitable both in value and repair, either prior to you making an offer, or while the agreement is conditional upon obtaining finance. A bank may ask for a registered valuation to assist with this.

b) Arranging insurance for the property.

A bank will not lend to you unless you can obtain insurance, which means you need to consider this prior to making an unconditional offer, or confirming finance.

Insurance considerations

The common insurance considerations are whether the property has any scrim, or older electrical wiring. It can be difficult to get insurance in these circumstances, and usually on the condition that these issues are remedied within a certain timeframe. They may exclude cover if one of these issues causes damage to the property.

Duty to disclose issues

Another thing to be aware of is the requirement to properly disclose when you become aware of an issue. If you have a builder’s report on a property and it discloses major maintenance issues or unconsented building works, you need to disclose these to your insurer. If you don’t don’t do this and an issue does occur then you may not have cover.