Survival Guide for WA Department of Commerce 5Th Edition 2012

Home , House Rules (season 3)

Government of Western Australia Department of Commerce Consumer Protection homebuyers Survival Guide for WA Department of Commerce 5th Edition 2012

BOARDING LODGING RENTING PARK HOMES RETIREMENT VILLAGES / OVER-55 COMPLEXES BUYING AN ESTABLISHED HOUSE BUILDING A HOUSE GETTING FINANCE INSURANCE CONTRACTS SAFETY IN THE HOME CHOOSING TRADESPEOPLE BOARDING LODGING RENTING PARK HOMES RETIREMENT VILLAGES / OVER-55 COMPLEXES BUYING AN ESTABLISHED HOUSE BUILDING A HOUSE GETTING FINANCE INSURANCE CONTRACTS SAFETY IN THE HOME CHOOSING TRADESPEOPLE BOARDING LODGING RENTING PARK HOMES RETIREMENT

BUILDING A NEW HOME OR BUYING AN ESTABLISHED PROPERTY

HOUSING CHOICES FOR OVER 55S

SAFETY IN THE HOME [

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] liableforanyinjury, lossordamageresulting www.commerce.wa.gov.au employees expressly disclaimanyliabilityand understood towaiveanylegalobligationsof its employeestothefullextentpermitted by (' impact ontheaccuracyofthatinformation. independentadvice(includinglegaladvice) publishing. Changesincircumstances after in theGuide.InnoeventshallStateof information. You/any personwhorelies on responsibility fortheinformationcontained releases theStateofWestern Australiaand your ownverificationandassessmentofit. information law from anyandallclaims relating tothe information ispublishedintheGuidemay (' by theofficers ofthedepartmentingood and complexprocess andthedepartment stresses thatyoushouldobtainyourown to beaccurateandreliable atthetimeof basis thatyouare responsible formaking The purchase ofreal property isaserious the department nature onlyandisprovided solelyonthe I and/orusestheinformationwaives and The informationprovided isofageneral WesternAustraliaanditsemployeesbe Guide forWA faith andderivedfrom sources believed copied, exceptwiththeexpress written real estateandhomebuildingservices. persons/entities whoprovide financial, The StateofWesternAustraliaandits This Guidemaynotbereproduced or from reliance onand/oruseofthe inrelation toyourownparticular persons/entities toyou,including The informationincludingadvice No assuranceisgivenaboutthe The informationshouldnotbe permission ofthe department. ') provided intheDepartment accuracyoftheinformation. (' the Guide ') use oftheinformation. Home Buyers Survival Home BuyersSurvival of Commerce's circumstances. DISCLAIMER ') isprovided

MOVING IN BEFORE SETTLEMENT REAL ESTATE THE CONTRACTFORBUYING OR BUYING FINANCE ISSUESFORBUILDING ABOUT BUYINGAPROPERTY THINGS YOUNEEDTOKNOW ESTABLISHED PROPERTY OPTIONS FORBUYINGAN WHEN DECIDINGTOBUILDORBUY WHAT YOUNEEDTOKNOW OVERVIEW OFHOUSINGOPTIONS 1 PLANNING INTRODUCTION BUYINGAHOME 2 contents H OSMRCEI OE 22 THE CONSUMERCREDITCODE THE CREDITCONTRACTAND 21 SHOPPING AROUNDFORFINANCE 19 LENDERS 20 TYPES OFLOANFEATURES SRT IL) 41 41 39 THE GENERALCONDITIONS (STRATA TITLE) THE O&ACONTRACT 36 THE O&ACONTRACT CONTRACT 39 THE OFFERANDACCEPTANCE 35 37 THE ROLEOFACONVEYANCER 30 ESTATE AGENT 32 THE ROLEOFAREAL CHECK THETITLE 34 CHECK THETHINGSYOUCAN’TSEE THE VISUALINSPECTION GETTING FINANCE S XET 15 16 14 DEALING WITHCONTRACTS USE EXPERTS 14 ESTABLISHING ARECORDSSYSTEM 10 YOU CANAFFORD FIND OUTWHAT FEATURES CONCESSIONS 13 CONSIDER FEES,CHARGES& TO BUILDORBUY KNOW WHAT YOUCANAFFORD YE FSLS 28 26 TYPES OFSALES TYPES OFFEESIMPLELAND ULIGAHUE 9 BUILDING AHOUSE PROPERTY 8 BUYING ANESTABLISHED COMPLEXES 7 7 RETIREMENT VILLAGES/OVER55 6 CARAVAN ANDPARK HOMES RENTING 6 BOARDING ANDLODGING 42 19 39 3 5 26 25 30 5 10 42 OWNER-BUILDING CHOOSING ABUILDER BUYING LAND BUYING 'OFF-THE-PLAN' DESIGNING AHOUSE LIST OFCONTACTS SAFETY INTHEHOME 64 HOUSING CHOICESFOROVER55s BUILDINGAHOUSE 3 4 SPECIAL FEATURES LENTV OE 61 60 59 ALTERNATIVE HOMES ENTERING INTOCONTRACTS CHOOSING TRADESPEOPLE 55 CONSTRUCTION 58 56 DISPUTES 57 54 STAGES OFCONSTRUCTION 52 GETTING FINANCE CONTRACT VARIATIONS THE BUILDINGCONTRACT 51 49 HOME INDEMNITYINSURANCE AGREEMENTS 50 49 50 49 PREPARATION OFPLANS 48 CHECKING OUTTHEBUILDER FINDING ABUILDER 47 CONTRACT BUILDERS 46 PROJECT BUILDERS BUYING LAND THE CONTRACTFOR AUTHORITY 47 REQUIREMENTS OFTHELOCAL THE TITLE THE SITE AEYCEKIT 74 73 73 SAFETY CHECKLIST 70 73 SMOKE ALARMS CURTAIN ANDBLINDCORDS 71 SAFETY SWITCHES SWIMMING POOLSANDSPAS 69 PARK HOMES 69 68 CARAVAN PARKS AND LIFESTYLE COMMUNITIES 69 HOSTELS ANDNURSINGHOMES 68 UNITS FOROVER55s THE RESIDENCECONTRACT 67 67 AND CHARGES CONSIDER ALLFEES 66 SOME QUESTIONSTOASK 65 REQUIRED TORECEIVE INFORMATION YOUARE 66 CHECK OUTTHEVILLAGELIFESTYLE VARIOUS VILLAGES 64 FIND OUTABOUT TO THEVILLAGE FIND OUTWHAT LAWS APPLY RETIREMENT VILLAGES

58 74 44 71 49

63 43 46 45 2 3 4

INTRODUCTION THE HOME BUYERS SURVIVAL GUIDE FOR WA is produced by the Department of Commerce. The guide provides relevant and useful information for Western Australians when buying or building their first home. The guide also provides information to assist people when buying their first 'easier living' home. Please note that the term 'property' in the guide is used to mean either a dwelling and land or land only. Additionally, the Commissioner for Consumer Protection, through the Consumer Protection Division of the Department of Commerce, administers the Western Australian real estate and settlement licensing and regulatory systems. Although Consumer Protection assists the Commissioner, it is ultimately the Commissioner who exercises his or her discretion. For ease of reference, this publication will refer to ‘Consumer Protection’ in all instances. The Building Commission Division of the Department Commerce administers the licensing and regulation of building, painting and plumbing services, issues owner- builder approvals and provides a dispute resolution service to the community. BUILDING COMMISSION – CONTACT US For further information about entering into a contract for a building service, call the Building Commission on 1300 489 099 or visit www.buildingcommission.wa.gov.au TRANSLATIONS CONSUMER PROTECTION – CONTACT US Call the Translation and Interpreting For further advice or information about buying or building a house, call the Service on 13 14 50. Ask for a Consumer Protection Advice Line on 1300 30 40 54. connection to 1300 30 40 54. National Relay Service for the hearing impaired: 13 36 77 www.commerce.wa.gov.au/consumerprotection Email address: [email protected]

REGIONAL OFFICES Great Southern South West Mid West Unit 2/129 Aberdeen St 8th Floor, Shop 3, Post Office Plaza ALBANY WA 6330 61 Victoria St 50-52 Durlacher St PO Box 832 ALBANY WA 6331 BUNBURY WA 6230 GERALDTON WA 6530 Ph: 9842 8366 PO Box 1747 BUNBURY WA 6231 PO Box 1447 GERALDTON 6531 Ph: 9722 2888 Ph: 9920 9800 Goldfields/Esperance Suite 4, 37 Brookman St North West Kimberley KALGOORLIE WA 6430 Shop 40, Woody's Arcade, PO Box 10154 Karratha Shopping Centre, 7/15 Dampier Terrace BROOME WA KALGOORLIE WA 6433 Sharpe Ave 6725 Ph: 9026 3250 PO Box 5 KARRATHA WA 6714 PO Box 1449 BROOME WA 6725 Ph: 9185 0900 Ph: 9191 8400

www.commerce.wa.gov.au [ PAGE 3 ] THE CONSUMER PROTECTION WEBSITE

MOST OF THE PUBLICATIONS REFERRED TO IN THIS GUIDE CAN BE FOUND ON THE CONSUMER PROTECTION WEBSITE: www.commerce.wa.gov.au/consumerprotection

ACKNOWLEDGEMENTS Consumer Protection acknowledges Consumer Affairs Victoria for the use of their concept and content in the production of the Home Buyers Survival Guide for WA. A number of photos were supplied courtesy of Consumer Affairs Victoria. Consumer Protection also thanks the following organisations/companies for their photographic contributions: Department of Housing, TRG Properties Pty Ltd, Emma Holland (Paragon & Co), Ross Squire Homes and Denise Sharbanee.

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HOME HOME WHEN WHEN GOOD IDEA TO GOOD IDEA TO

www.commerce.wa.gov.au 1 THINKING ABOUT THE BEST TYPE OF LIVING THINKING ABOUT THE BEST TYPE OF LIVING ARRANGEMENT FOR YOU, IT IS A WEIGH UP ALL OF YOUR OPTIONS. IT IS ALSO WORTH THINKING ABOUT HOW YOUR CHANGE IN THE FUTURE LIVING NEEDS MAY YOUR CHOICE OF AND MAKING SURE THAT LIVING ARRANGEMENT CAN MEET THOSE YOU MAY EXPECTED CHANGES. FOR EXAMPLE, OR A FAMILY BE THINKING ABOUT STARTING MOVING TO A JOB IN A DIFFERENT AREA, OR YOU WHO ARE LIVING PARENTS ELDERLY MIGHT HAVE WITH YOU OR INTEND TO LIVE WITH YOU IN THE FUTURE. HERE ARE A FEW EXAMPLES OF DIFFERENT YOU MAY SORTS OF HOUSING OPTIONS THAT WISH TO CONSIDER. OVERVIEW OF HOUSING OPTIONS THE WE ARE OFTEN ENCOURAGED TO FULFIL BUT DREAM OF OWNING OUR OWN HOME, OWNERSHIP IS NOT FOR EVERYONE. PLANNING BOARDING AND LODGING If you are a boarder, you have permission to stay at another person’s property, for which you pay rent, and usually, meals are provided. Lodgers pay rent to stay at another person’s property, but usually, meals are not supplied.

PROS CONS • The arrangement can work well if • Generally you can’t control who is you get along with the owner able to live in or visit the property. and/or other housemates. • Depending on your agreement, the • Depending on your agreement with owner may only have to give you a [

SECTION the owner, you may only have to short period of notice to leave. give the owner a short period of • There may be 'house rules' about

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notice that you intend to leave. matters such as keeping pets, using common facilities and the amount PLANNING of noise that is acceptable. FOR MORE INFORMATION

ABOUT BOARDING AND LODGING: • for a free copy of our brochure Boarders and lodgers call Consumer Protection on 1300 30 40 54; or • visit our website at www.commerce.wa.gov.au/consumerprotection

OWNING A HOME is not for everyone

RENTING Tenants can generally exclude anyone, including the owner, from accessing the property or land site that they rent. However, owners may carry out inspections of the property as long as they comply with the law.

PROS CONS • Tenants have their rights and • Generally owners are able to ask responsibilities set out in the tenants to leave by giving them the Residential Tenancies Act 1987 and appropriate notice required by law. other laws. • There are likely to be rules about • You may be able to afford to rent, how the property should be used, but not to buy a house, in your for example whether pets may be preferred suburb. kept on the property. • Generally, and you should check that • You may be penalised if you leave this is the case, you don’t need to the property before the lease worry about paying local authority expires. (council/shire) and water rates or doing repairs to the house that are the result of fair wear and tear.

FOR MORE INFORMATION

ABOUT RENTING: • call Consumer Protection on 1300 30 40 54 and ask for a copy of our free booklet, Renting a home in Western Australia: a tenant's guide; • visit www.commerce.wa.gov.au

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1300 30 40 54 , the on . ; or www.commerce.wa.gov.au www.commerce.wa.gov.au Consumer Protection and ask for a copy of our free brochure brochure and ask for a copy of our free So you’re thinking about moving into a retirement village visit: turn to pages 64–69 of this Guide; call Complexes may offer residents residents Complexes may offer to facilities to access direct of life, such enhance their quality pools, as maintained swimming gymnasiums and gardens. Some complexes provide access to Some complexes provide greater residents facilities that offer security peace of mind, including and health care. Many complexes provide opportunitiesMany complexes provide to meet for similarly aged residents and socialise. Depending on the complex, have their legal rights residents set out in the and responsibilities Act 1992 Retirement Villages Code of Fair Practice for Retirement Villages law. and other The units may be smaller than the family home and therefore current easier to clean, live in and maintain. A review of the laws that apply to of the laws that apply A review was concluded in villages retirement late 2010. Amendments to the Act likely to occur in 2011 are If you own or occupy a unit in a and/or fees complex, restrictions may apply when selling the unit. Complexes require that residents pay that residents Complexes require ongoing fees and sometimes these ongoing fees must still be paid even if you leave and your unit is not or re-leased immediately re-sold, occupied. Complexes are generally designed Complexes are for people to live closer together, which may sometimes create disagreements. FOR MORE INFORMATION • ABOUT UNITS IN RETIREMENT VILLAGES OR OVER 55 COMPLEXES: • • RETIREMENT VILLAGES/ VILLAGES/ RETIREMENT 55 COMPLEXES OVER the for of options a number are There who may not only group, over 55 age about 'putting a roof be thinking but may also be over their head,' lifestyle. live a different looking to PROS • • • • • • CONS • • • Residential Parks www.commerce.wa.gov.au or visit (Long-stay Tenants) Act 2006. (Long-stay Tenants) a caravan or The cost of relocating park home is likely to be high. often rules that may affect are There how you behave on the land site, for example making noise, having visitors and pets and the use of common facilities. While you may own a caravan or and a site park home, you only rent do not own the land. The property owner can generally ask you to leave by giving you only the notice under the required • • CONS • 1300 30 40 54 and on

Act 2006 . Residential Parks Consumer Protection Caravan Parks and Camping turn to page 70 of this Guide; call the Grounds Act 1995 The cost of buying a caravan or park home is generally less than buying or building. generally located inThe land sites are close to popularnatural settings, are you may meet newamenities where people and might also be sites you may to buy. not normally be able to afford The legal rights and responsibilities The legal rights and responsibilities of caravan park owners and residents set out in the are (Long-stay Tenants) FOR MORE INFORMATION ABOUT CARAVAN AND PARK HOME LIVING: HOME AND PARK ABOUT CARAVAN • • • • PROS • CARAVAN AND PARK HOMES PARK AND CARAVAN a caravan include buying or renting Mobile homes for living (rather than holidaying) or park home is placed is generally or park home. The land on which the caravan leased. BUYING AN ESTABLISHED PROPERTY A general overview of the pros and cons of buying an established property is provided below.

PROS • When buying an established property you can see many aspects of what you are buying and you can generally move straight into the property after settlement. • Home ownership is a form of forced [

SECTION saving toward an asset that may increase in value.

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• Depending on the property you buy, you can usually make your own PLANNING decisions about the use of the property, for example keeping pets, renovating or putting in a swimming pool.

CONS • If you are paying off the mortgage on your property, changes in your circumstances, such as a job loss may affect your ability to keep making your repayments and if so, you may lose your property as a result. • If you are paying off the mortgage on your property, interest rate rises may affect your ability to keep making your repayments and if so, you may lose your property as a result. YOUR CHOICE OF • It may be more difficult to move, especially if you need to sell your LIVING ARRANGEMENT property before buying or moving elsewhere. • As a homeowner, you are required should suit your current to pay local authority rates and charges for water, sewerage and and future needs drainage services each year as well as keep up with your regular bills, for example electricity, phone and gas. • You may be prevented, either financially or by law, from making changes to the property, and this may not be apparent without thorough investigation before you FOR MORE INFORMATION buy. ABOUT BUYING AN ESTABLISHED PROPERTY: • turn to pages 10–42 of this Guide; • call Consumer Protection on 1300 30 40 54 and ask for your free set of real estate and settlement fact sheets • visit: www.commerce.wa.gov.au

[ PAGE 8 ] www.commerce.wa.gov.au BUILDING A HOUSE A general overview of the pros and cons of building a house are provided below.

PROS CONS • You can choose the design and • There may be unexpected costs, features of the house, for example for example, site preparation or room size, light and tap fittings and attending to things overlooked in floor coverings. the building contract. • Home ownership is a form of forced • There may be delays in completing saving toward an asset that may the house, for example, due to the increase in value. weather. • When you own your own house, • You may need to spend more money [

you can usually make decisions to finish off your house after SECTION about the use of the property, for building, such as buying floor 1

] example having pets and making coverings, paint, curtains and plants. changes to the property. • If you are paying off the mortgage PLANNING on your house, changes in your circumstances, such as a job loss, may affect your ability to keep making your repayments and if so, you may lose your property as a result. • If you are paying off the mortgage on your house, interest rate rises may affect your ability to keep making your repayments and if so, you may lose your property as a result. • As a homeowner, you are required to pay local authority rates and charges for water, sewerage and drainage services each year as well as keep up with your regular bills, for example electricity, phone and gas. • It may be more difficult to move, especially if you need to sell your house before buying or moving elsewhere. • Owner building your own home means that you take on some of the obligations and responsibility for the building work as a registered building contractor.

FOR MORE INFORMATION

ABOUT BUILDING A HOUSE: • turn to pages 10–24 and pages 43–62 of this Guide; • call Consumer Protection on 1300 30 40 54 and ask for your free set of building fact sheets; or • visit our website: www.commerce.wa.gov.au • call the Building Commission on 1300 48 90 99

www.commerce.wa.gov.au [ PAGE 9 ] WHAT YOU NEED TO KNOW WHEN DECIDING TO BUILD OR BUY [

SECTION Making a decision to enter the real estate market is not only a financial commitment, but an emotional commitment as well. After

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all, you’re buying a property that satisfies a basic human need and it is a place where you’ll spend a good deal of your time.

PLANNING LOOKING AT YOUR The emotions involved in buying a home are important, but it is a good FINANCES idea not to get too attached to a particular property or to make quick To find out what you can afford, you decisions. will need to sit down and look closely at how much you spend and save now. For example, when buying a block of land, you can get carried away You’ll also need to think about what by the sales pitch about the position and price of a particular block. you think you are likely to spend and Unfortunately, you may fail to take into account that preparing the save in the future. block for building may cost you thousands more dollars than you Below is a method that will help you intended to spend and the house you wanted to build on the land look at your spending habits and work might not even fit on the block! out whether you can afford to buy a Taking the time to look into a deal may mean missing out on a good house now or in the future. buy, but more often than not, it will save you from making unwise decisions. And if you do happen to miss out on a good deal, THE EXPENSES FILE remember there will be others. Buy yourself an expandable folder with pockets from A to Z. Over a The following are six tips we suggest you consider before you enter period of time, file all your bills, the real estate market that will help you make good choices when receipts, movie/sport/theatre tickets, buying or building. credit card statements and any personal loan statements into the expandable folder. Also, file any payslips, pension or any other statements that indicate Consider whether you can any regular payments. Make a note (and file it in the folder) afford to buy or build now of the date when you started the process of filing all your income and expenses. and maintain payments in Over time, the contents of the file will give you a good idea about where your money comes from and where the future your money goes. The information will help you to work out a budget. A budget is a tool that helps you make Planning tip #1: decisions about where to spend your KNOW WHAT YOU CAN AFFORD TO BUILD OR BUY money, how much to save and also When buying or building a home, it is likely that you helps you regularly keep an eye on your will be paying off a home loan over many years. In progress. addition, when you own a property there are all the A budget is a very useful starting other ongoing bills that must be paid. It is not only point if you are serious about owning important that you can afford to buy or build and (and keeping) your own home. A meet your expenses now; you must also be able to continue to afford your home and expenses in budget planner is provided at Table 1 the future. opposite.

[ PAGE 10 ] www.commerce.wa.gov.au TABLE 1: WEEKLY BUDGET PLANNER INCOME Income The first step in filling out your Income Types: $ per week budget is to work out how much • Wages/Salary money you receive per week (but don’t • Pension/Benefit include any tax or superannuation that • Other you’ve paid). Add up all weekly TOTAL INCOME sources of income and put these SPENDING amounts in the ‘income’ section of the budget planner at Table 1 left. Housing $ per week The task of filling in your income • Mortgage/Rent may be tricky if your income is irregular, • Land/Water rates but you should attempt to calculate a • Repairs/Maintenance conservative average. [

Groceries/Food SECTION • Groceries/Takeaways Spending 1

The next step is to work out where

Credit ] • Payments on personal loans your money goes.

• Payments (if you have outstanding debts) If you have been using the PLANNING on credit/store cards expandable file, take out all your Insurance bills, receipts, loan and credit card • Building/Contents statements. Group your bills together • Car and work out how much (on average) • Life/Health you spend on each area per week. Medical For example, Jane got all her • Doctor/Dentist electricity bills together over a six • Specialists/Other month period. The electricity bills came Car/Transport every three months, and on average, • Petrol • Fares/Parking Jane paid $150 per bill (or $12.50 per • Licence/Registration week). Jane writes down $12.50 next • Maintenance/Other to electricity spending on the budget Clothing worksheet. • Clothes By grouping all her grocery bills • Shoes together over the same six month Utilities period, Jane found that on average, • Water/Gas/Electricity she spent about $100 per week on • Telephone/Mobile phone/Internet/Pay TV groceries. Jane writes down $100 Education next to the grocery item on the budget • School/Kindergarten/Crèche fees worksheet. • Books Keep grouping your bills together • Excursions for each category of the budget • School uniforms planner, estimate the amount you • Child maintenance spend on each category per week Pets and then put the figure next to each • Vet/Medication/Treatment relevant category on the worksheet. • Registration Make sure you include items that • Pet food you don’t pay for often–you may Personal need to guess. For example, Jane • Haircuts estimates that her contents insurance • Chemist is $300 per year (about $6 per week). • Cigarettes/Alcohol Jane writes down $6 next to the • Dry-cleaning • Gifts: Christmas/Birthdays/Donations contents insurance item on the budget worksheet. Entertainment • Movies/Hobbies/Sport/Lotto If you don’t like the idea or haven’t • Books/Papers had the time to use the expandable • Travel/Accommodation file, you may have to guess or estimate Savings your spending and income for each • Emergency item in the budget planner. Your • Voluntary superannuation contributions budget will then only be as good as • General the guesses you’ve made. TOTAL SPENDING Net income www.commerce.wa.gov.au [ PAGE 11 ] A budget will help you MAKE SPENDING AND SAVING DECISIONS

LOOK AT YOUR BUDGET • Make sure you save for gifts, The budget will really help you to holidays and entertainment rather look at your spending habits if you try than buying these things on credit. [

to be as accurate as you can with your • Plan your spending on gifts so that SECTION spending on each item. you’re not buying on impulse or

1 If your total spending is more than leaving your shopping until the last

] your total income, you may need to minute.

PLANNING look at ways to cut back on your BORROWING MONEY spending, especially if you want to save FOR A HOUSE up for a deposit on a home. If you Lenders may be more willing to give spend a lot of money on certain areas, you a home loan if you pay your bills such as food or clothing, you may want regularly, have demonstrated a savings to target these areas for possible history, or have saved a substantial cutbacks. proportion of the purchase price. Below are some other tips to help By carefully drawing up and sticking you save money and start saving for a to your budget, you can be confident deposit on a home. that you have the skills to pay off a • Make up a shopping list before you home loan and continue to pay all your get to the supermarket and stick to other bills. the items on the list. The budget exercise will also help • Make sure you have enough food to you to determine how much you can TAKE TIME last until your next shopping trip, so borrow. If you have access to the you don’t need to go to convenience internet, type 'mortgage calculators' stores or buy take-away food, which into your search field and try using the can often cost you more. different calculators. This will give you • Instead of buying your lunch, an idea about the amount of money Otherwise, you can search the yellow consider making your lunch and you may be able to borrow. pages under 'credit reporting services' bringing it into work every day. You may also wish to view your to obtain your credit file. • Make paying off any debts, such as credit file, to ensure that it is accurate Be aware that you will be charged a your credit card and personal loans a and to find out whether there are fee to get a copy of your credit file. priority. any references on your file that may • Try to pay off your credit card within cause your potential lender some ASSISTANCE AVAILABLE the interest-free period. concern about your ability to repay a The budget process described above • Consider setting a savings goal, so loan. Copies of your credit file can be may not suit everyone or you might you can start saving for a deposit. obtained from credit reference agencies want someone to go through the • Shop around for a bank/building online by typing 'credit reference' into budget process with you individually. society or other financial institution your search engine on the internet. The information box below lists that will set up an account or organisations that can either provide accounts for you with no monthly you with free advice on credit, debt and fees. financial problems, or can refer you to • Regularly check that fees do not an appropriate financial service to meet apply to your accounts and be your requirements. prepared to move your money FOR MORE INFORMATION to institutions that allow you reasonable access to your funds ABOUT THE BUDGET PROCESS: but do not charge you fees. • call the Consumer Credit Legal Service on 9221 7066; or • call the Financial Counsellors' Association of WA on 9221 9411, for a referral to a financial counsellor.

[ PAGE 12 ] www.commerce.wa.gov.au LIST OF FEES AND CHARGES • Regular loan administration fees may apply. Costs associated with borrowing • Changing the features of your loan money during its term (such as applying for a • A loan application or establishment fixed interest rate) may also attract fees. fee may apply. This is a one-off 'administration' Other one-off expenses charge to set up the loan. • Government charges apply. • The interest rate is a consideration. Duty is payable on the market value It is important to remember that of the property. You should check the longer it takes you to pay off with the Office of State Revenue the loan, the more interest you will about the time limits for lodging the pay to your lender. The interest contract and payment of duty. rate may also rise during the term • There is the cost of expert advice [

of your loan, which will increase when buying or building, such as SECTION your repayments to your lender. The settlement agents, lawyers and 1

building consultants. ]

rise in your repayments may affect your ability to keep making the Turn to page 15 of this Guide for payments and if so, you may lose more information on employing PLANNING your property as a result. experts to give you information to • Consider taking out income help you build or buy. protection insurance. • Moving costs may be incurred, Unlike mortgage insurance, this is a including: policy that you can take out to help • hiring removalists; pay your mortgage if you are unable • connection fees for utilities, like to work due to illness, retrenchment, electricity, telephone and gas; and or death. • cleaning and repair costs associated with leaving a rental property. • Home indemnity insurance permit fees and a building service levy apply TO LOOK INTO A DEAL CAREFULLY. when you employ a builder (included in the building contract but taken It will pay off in the long run out by the builder): see pages 51 and 61 for more details.

Ongoing costs • Valuation fees may apply when • Strata levies may apply, which buying an established property. include the cost of building The lender will generally send a insurance for strata titled properties. valuer to the place you intend to • Consider taking out contents and buy to ensure that the market building insurance. price you’ve agreed to pay for the • Home utility costs apply, including property is close to its value. electricity, gas and phone bills. Although you pay the one-off • Water and local authority rates and valuation fee, you don’t usually water consumption are payable receive a copy of the report. yearly when living in the property. • Mortgage insurance may apply when • Most homes cost money to Planning tip #2: buying an established property. maintain – some more than others. CONSIDER FEES, CHARGES & The lender may require you to pay CONCESSIONS mortgage insurance, particularly if The cost of buying a home is much you are borrowing more than about FOR MORE INFORMATION more than just the price of land 80 per cent of the value of the ABOUT STRATA TITLED PROPERTIES: and any dwelling. Similarly, property or if you are buying property the cost of building isn’t just • turn to pages 26–27 of this Guide. outside the metropolitan area. the block price and the cost of building work. There are other Even though you pay for the costs you need to plan for when mortgage insurance, it won’t protect buying or building. you if you cannot meet your repayments. (It only protects the lender when you cannot repay the loan).

www.commerce.wa.gov.au [ PAGE 13 ] Planning tip #3: FIND OUT WHAT FEATURES YOU CAN AFFORD [

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] CONCESSIONS RESEARCH Planning tip #4:

PLANNING You may be eligible for various After gaining some idea about the concessions in relation to the costs of amount of money you can afford to ESTABLISH A RECORDS SYSTEM buying or maintaining a property from spend on a property, think about the From the planning phase to the a range of government departments. type of features you want within your time you step into your new home, you will not only be dealing with price range. a number of people, but you will • List the features that are important have collected lots of paperwork FOR MORE INFORMATION to you in a property. with important information. ABOUT CONCESSIONS: To get you started, use the buying • turn to pages 30 of this Guide. checklist on pages 32–33 and visit display homes. INFORMATION STORAGE • Get a map book and list suburbs Here are some tips to help you keep where you would like to live, with all the important information at your properties that fall within your price fingertips. range. • Keep a file for all paperwork to do • Reasearch newspapers and the with buying or building. internet for up-to-date information The types of paperwork to include in about the general price and demand your file are: for blocks or properties in your • any advertisements for properties preferred suburbs. or blocks that interest you; Be realistic and choose suburbs • quotes for any experts you are where you can find houses in your thinking about employing; price range. • copies of contracts and other • Visit real estate websites on the forms; internet and talk to family and • a copy of the building plan; and friends about the type of real estate • general information about the you’re interested in buying. home buying process or home building process. • Keep a diary to record any discussions with salespeople, builders, or agents and indicate: • the time and date of all telephone conversations; • the name of the person with IF YOU MISS OUT ON A whom you spoke; and • what was discussed, and particularly what was agreed. GOOD DEAL, don’t worry, You may also use the diary to record details of any home there will be others! inspections you carry out if you are purchasing an established property.

[ PAGE 14 ] www.commerce.wa.gov.au CHOOSING AN EXPERT So what sort of things should you be looking for to increase your chances of employing someone who will do a good job for you with no hassles? Here’s a checklist. • The person comes highly recommended by people you know. • Talk to people at work, your family, friends and anybody else who you trust. • Contact the relevant industry [

association to recommend suitable SECTION experts in your area. 1

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• The person has the relevant licence or qualifications to act for you. • The person is a good communicator, PLANNING approachable and easy to deal with. Choose your experts carefully

• You understand exactly what the person will be doing for you, how WHEN BUYING OR BUILDING, much it will cost and approximately how long the job will take. EMPLOYING THE RIGHT • Get written quotes. • The person you employ can approach the deal as if it was his/ EXPERTS AT THE RIGHT TIME her own property purchase or his/her own house being built. should save you money • Ask the person to put in writing that their only involvement in your deal is to act under your instructions. in the long run More information about loan contracts is on pages 22-23. DEALING WITH EXPERTS TYPES OF EXPERTS You will also have separate contracts Employing the right experts at between you and any experts that you the right time may be the difference decide to employ. between buying or building your dream For example, if you employ a building home or making a very expensive inspector, there will be a contract mistake. between you and the building inspector For more information about the types to write up a building report. of experts you may want to use when Some of the contracts you enter, for Planning tip #5: buying an established property, turn to example, the employment of a building page 34. inspector, may have terms that are agreed USE EXPERTS For information on the types of verbally. However, for the purchase The process of buying or building experts who can help you when and sale of real estate or agreements for involves finding out and using building a house, turn to pages 44, home building work, contracts MUST be lots of information, which takes time and experience. However, 49-50 and 59-60. in writing by law. people don’t buy or build a house We strongly urge that all contracts every day, so there are times when you enter into are in writing. Verbal you may need to employ experts contracts are very difficult to prove if who have the time and expertise things go wrong. Read on for more to help you make good decisions. information about contracts.

www.commerce.wa.gov.au [ PAGE 15 ] Planning tip #6: UNDERSTAND HOW TO USE CONTRACTS A contract is a legally binding agreement and may involve a number of people (or entities, such as companies). When buying or building, you will necessarily enter into a number of contracts, some of which are mentioned below. • One contract, between you and the seller of a property, sets out the terms and conditions of buying property and must be in writing. • You may enter a contract with a money-lending institution, setting out the terms and conditions of a loan. • As explained earlier, you may enter separate contracts with any experts that you decide to employ. [

SECTION

] BEFORE SIGNING ANYTHING take the

PLANNING contract away to read and get advice

WHAT IS ALL THE FUSS • the hot water system in the house ABOUT SIGNING A you are building is sufficient for a CONTRACT? family of four; or Contracts can be thought of as • the electrical wiring has been setting rules between you and another correctly installed by a licensed party or parties. The contract rules electrician and is safe to use. (called terms or conditions) set out If there are any terms that are what each party will do for the other, particularly important to you when the time by which such actions will be buying, it is important that these terms done and what happens if any party are written into the contract. Problems fails to play by the rules. can be avoided if terms are in writing The contract should set out all the and their meaning is clear. rules so there is no uncertainty. The If you sign a contract, you are law treats contracts seriously and you agreeing to abide by the terms set should be very careful before entering out in the contract. This will be into a contract. enforceable through the courts. Once There may be certain terms that are everyone affected by a contract has important to you, or that you might signed, generally you can only get the expect when buying or building like: terms changed if everyone who signed • the gas heater or pool equipment is the contract agrees in writing to any included with the property you are changes. buying; or

YOU SHOULD BE very careful BEFORE ENTERING A CONTRACT. The law treats contracts seriously

[ PAGE 16 ] www.commerce.wa.gov.au Don’t sign a blank contract or allow details to be filled in later [

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HANDY TIPS FOR DEALING • Ask for a copy of any contract you WITH CONTRACTS sign (you are entitled to a copy). • Make sure all things that are • Remember that every person who important to you (your rules) are is a party to the contract is usually clearly included in the contract. responsible for making sure that the • Make sure that the person(s) you terms of the contract are followed. are buying the property from is/are It is important to note that THE LAW legally entitled to sell the property. IN WESTERN AUSTRALIA DOES NOT • Consult a lawyer when adding your REQUIRE THAT CONTRACTS FOR THE own terms to a contract so that they PURCHASE OF PROPERTY CONTAIN A are clear and enforceable. COOLING OFF PERIOD. If the contract • Don’t use liquid paper on a contract. does not include a cooling off period, • Cross out and initial any terms in a you cannot get out of a contract to contract that you want to delete or buy or build because you have changed change and ask the other party to your mind. the contract to initial the changes When entering into a building and deletions as well. contract the plans and specifications • Don’t sign a blank contract or allow form part of it. Where the Home details to be filled in later by any Building Contracts Act 1991 applies the person, including a salesperson. builder must give to the owner a notice Draw a line through any blank setting out the provisions of the Act. spaces that do not need to be filled in. See page 52 for further information. • Take as much time as you need to read and understand each contract– don’t be rushed! FOR GENERAL INFORMATION Before signing anything, ask for a copy of the contract to take ABOUT CONTRACTS: away with you to read carefully • call Consumer Protection on 1300 30 40 54 and ask for your free brochure and to show to a friend or advisor entitled Contracts: information you need to know; or (preferably your lawyer). • visit the website: www.commerce.wa.gov.au • Contracts are often complex documents, so if there is anything ABOUT GETTING LEGAL ADVICE: you don’t understand, get some • consult the Yellow Pages; legal advice or seek other advice • call Law Access & Advice on 9322 4911; from an appropriate expert (for • call the Law Society on 9322 7877 for a referral to a lawyer; or example, an architect) before • call the Citizens Advice Bureau on 9221 5711 (there is a fee for legal advice). signing.

www.commerce.wa.gov.au [ PAGE 17 ]

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reach afairsettlement. series ofmediationsessions,Johnwashopefulthattheycouldsoon the situationbetweenhimselfandLeo.AfterLeoagreedtoattenda keep upthepayments,John’s creditrecordwouldbeaffected. repayments.IfLeodidnot house andkeepmakingthemortgage tomoveoutofthe the bankrefused.Johnknewitwouldbedifficult sell thehousewithLeo’s order. agreementorwithacourt Leo wasdeterminedtostayinthehouse.Johnrealisedhe to endtherelationshipwithLeo.Johnwantedsellhome,but repayments. only Johnthatactuallymadethemortgage asjointtenants.However,John andLeoownedtheproperty itwas and thebankacceptedJohnLeo’s applicationforahomeloan. the contracttobuyhouseandhomeloancontract. down thedepositonhouse,bothJohn and decideditwastimetobuyahousetogether. Although RELATIONSHIPS ANDCONTRACTS–APAINFUL MIX CONTRACTS AND PROPERTY OWNERSHIP CONTRACTS ANDPROPERTY lender ifyouowemoneyontheland. certificate oftitle.You shouldnotethatthecopyoftitleusuallygoestoyour will owntheproperty. you signtobuyaproperty andgetfinance,butitisalsoimportanttoconsiderwho ] www.commerce.wa.gov.au When buyingproperty inWesternAustralia,youwillreceive acopyofthe Not onlyisitimportanttoconsidercarefully whowillbenamedonthecontracts John decided that he needed to get some legal advice to sort out John decidedthatheneededtogetsomelegaladvicesort John askedthebanktoreleasehimfromcreditcontract,but Three yearsafterthecouplemovedintotheirhome,Johndecided The couple’s tobuythehousewasacceptedbysellers offer John andLeohadbeenrentingahouseascoupleforfiveyears

case study for everyone and thecoupleremainfriends. for everyone property. Gregdecided to stayinthehouseandpaidSarahforhershareofhouse. their agreement,Greghadan option topaySarahmarketvalueforhershareinthe cent shareandSarahowninga25pershare. astenantsincommon,withGregowninga75per Greg andSarahownedtheproperty oftitleshowedthat bank gaveGregaloanforthehouse.Atsettlement,certificate loan forthehouse.ThesellersagreedtosellhouseGreg andSarahthe and Sarahwouldpayaquarter. ThecoupledecidedthatonlyGregwouldapplyfora clearly setoutwhatthecouplewoulddowithhouseif relationshipended. employed alawyertocreateanagreementbetweenGregand Sarah,whichwould the depositonhouseandSarahcontributedrestof deposit.Thecouple they woulddowiththehouseifrelationshipdidn’tlast. the distantfuture.Beforelookingforhouses,couplesatdownanddiscussedwhat REMAINING FRIENDS The agreementbetweenGreg and Sarahmadedealingwiththehousealoteasier andtherelationshipendedaftertwoyears.Accordingto The coupledidnotmarry ofthemortgage Greg andSarahalsodecidedthatwouldpaythree-quarters of When thecouplefoundahousetheybothliked,Gregputdown three-quarters in Greg andSarahdecidedtobuyahousetogetherwerethinkingofmarrying and Leo’s names appeared on appeared on John put John put could only could only

case study 2. 1. you shouldthinkaboutanddiscuss. two typesofownershiponatitlethat with anotherperson,atlawthere are doesn’t last. will happeniftherelationship in commonandtalkaboutwhat it willbeasjointtenantsor sharing ownership,discusswhether effects, soifyouare thinkingabout If youare buyingorbuildingahouse Buying orbuildinghaslong-term being sold. owners mustagree totheproperty upon yourdeathinwill.All will inherityourshare ofaproperty to othersandyoucanspecifywho can transferyourshare ofaproperty shares inapieceofproperty. You 'Tenants incommon'holdundivided tenants incommon. Ownership intheproperty as certificate oftitle. form withLandgatetoamendthe to lodgean'ApplicationbySurvivor' surviving ownerorownerswillneed surviving ownerorowners.The automatically giventotheother die, yourownershipinthelandis the property beingsold.Whenyou jointly. Allownersmustagree to or othersownthepieceofproperty As 'jointtenants',youandanother joint tenants. Ownership intheproperty as FINANCE ISSUES FOR BUILDING OR BUYING

Whether building or buying, it is a good idea to start doing some homework to find a home loan that is right for you. Home loans have different features, including fees and charges and different pay back options. The home loan with the lowest interest rate is not necessarily the cheapest. [

Working through different finance options can be difficult and confusing for many people. SECTION Shop around, ask as many questions as possible and get help, if necessary. 1

]

PLANNING TYPES OF LOAN FEATURES Combination loans A combination loan allows you to THE INTEREST RATE split your home loan into a fixed rate The interest rate is the 'price' you part and a variable rate part. Generally, pay to the lender when you borrow you can decide how much of the loan money. will be subject to a fixed rate of interest and a variable rate of interest. Variable rate loans Usually, the fixed rate part of your With a variable rate loan, the interest home loan is available for a period of rate can rise or fall throughout the life between one to five years. Beware! (or 'term') of the loan. The interest rate You may be required to pay two sets of can change depending on the economic application fees for a combination loan climate and competition among lenders. and you may be charged a fee every You should ensure that you would time you re-negotiate a new fixed term be able to meet any increases in your portion of the combination loan. mortgage repayments if the interest rate increased during the term of your loan. REPAYMENT FEATURES Fixed loans Some home loans, such as fixed With a fixed loan, the interest rate is interest rate loans, may have restrictions 'locked in' for a certain period – usually on making payments that are greater between one and 10 years. This type of than the agreed or scheduled loan provides borrowers with certainty payments. It is useful when the terms about the amount of their repayments of a loan allow you to make extra during the fixed period and protects repayments towards the loan, including them from interest rate increases. making lump sum payments. If you However, borrowers will not be able to are able to make extra repayments on BEFORE take advantage of any drop in interest a loan, it will reduce the amount of rates. money you must repay to the lender and it will also reduce the length of DECIDING TO Introductory rates time it takes you to repay the loan. 'Honeymoon' or 'introductory' rates If you have a fixed interest rate loan BUILD OR BUY, on loans are interest rates that are for a certain time period, there may be generally lower than most lenders are high penalties applicable if you decide shop around offering in the home loan market and to pay out the loan before the time may be fixed or variable for a short period expires, for example, if you sell for a home period of time, usually between six your property or you decide months and one year. Beware! You to refinance with another lender. should make sure that you could still loan afford your mortgage repayments once the fixed interest rate period finishes and the interest rate becomes the standard variable rate.

www.commerce.wa.gov.au [ PAGE 19 ] REDRAW Some loans will allow you the flexibility to withdraw any extra payments that you have made towards the loan. You should check the rules about withdrawing these extra payments, such as fees you may be charged and minimum amounts you can withdraw at any one time.

OFFSET LOANS Offset loans are a particular type of loan facility where you pay all of

[ your income into the loan account and

SECTION withdraw funds, as required. The loan typically includes the use of a credit

]

card to pay for your daily expenses, which can be paid off once a month via PLANNING the loan account. A benefit of this type of loan is that your income is being used to pay off the loan. A drawback with this type LENDERS DISPUTES WITH LENDERS of loan is that it may be tempting to The following are the types of If you have a dispute with your overspend. lenders that can offer you a home loan. lender, you should try to resolve the With this type of loan, if you do not problem (preferably in writing) with the BANKS pay off your home at a reasonable rate, lender’s customer relations department. you could end up paying the loan off Banks often have a convenient If the problem is still unresolved, you over a longer period of time. If you branch network and offer a range of may be able to lodge your complaint overuse the credit facility, you may find different savings and credit accounts, with the and Financial Ombudsman that the amount you are required to in addition to home loans. Banks, Service. repay blows out so that you are unable which are subject to supervision by to repay the loan and if so, you may the Australian Prudential Regulation risk losing your house. Authority, provide security for their FOR MORE INFORMATION customers, but may be stricter about FEES AND CHARGES who is eligible for a loan. ABOUT BANKING A list of typical fees and charges COMPLAINTS: associated with taking out a home loan NON-BANK LENDERS • contact the Financial are provided on page 13. You should Non-bank lenders include credit Ombudsman Service by: also ask about any fees or penalties unions, building societies and other • calling 1300 78 08 08; or that apply: financial institutions. • visiting the website: • paying out your loan early; Some non-bank lenders operate www.fos.org.au • redrawing any extra payments you through mortgage brokers and may have made towards the loan; and increasingly via the internet. However, • negotiating another fixed term on most of the business is done over your loan. the phone and you can make an appointment to be visited by a representative. Non-bank lenders may offer competitive and creative home loan products. Lenders that are not so strict about who is eligible for a loan may charge higher interest and fees. Non-bank lenders may also offer associated products, such as deposit accounts and credit cards. However, some non-bank lenders may not have the ease of access to such accounts through local branches and automatic teller machines (ATMs).

[ PAGE 20 ] www.commerce.wa.gov.au KEYSTART WHAT DOES A MORTGAGE BROKER DO? Keystart aims to provide Western A mortgage broker can help you find out about different home loans available in Australians with access to home the marketplace and may be able to arrange special deals. A mortgage broker may ownership, and can offer loan also be able to assist people who might otherwise find it difficult to borrow money, packages to borrowers who may find for example, if you have had problems repaying a debt in the past. However, you may it difficult to borrow money in the pay a higher interest rate if you have a bad credit history. general marketplace, including: It is useful to note the following information and tips when using mortgage • low-income earners; brokers. • people who have a low deposit for • Do your own research about the type of home loan that suits your circumstances. a house; and Shop around for loans by doing some research, for example on the internet, check • those in casual employment or on magazines, talk to family and friends and set your own financial limits (see pages commission. 10–12). Keystart also operates specific • Contact two or three mortgage brokers by phone or over the internet and find out

schemes for people with disabilities, what they can offer. [

Aboriginal people, Department Some brokers may offer a limited range of loans. Ask the broker to provide you in SECTION of Housing tenants and people writing with a list of the lenders whose products he/she promotes or considers on 1

] experiencing temporary financial behalf of clients. hardship.

• You can find out if a mortgage broker is registered or licensed with ASIC by: PLANNING • calling ASIC's Infoline on 1300 300 630; or FOR MORE INFORMATION • searching ASIC's database at www.moneysmart.gov.au. ABOUT LOAN PRODUCTS • Check if the mortgage broker will charge you a fee for their service. AVAILABLE: Generally, mortgage brokers do not charge you to look for a home loan, but do • contact a number of banks and not assume that this is the case. Mortgage brokers are usually paid by lenders. non-bank lenders; The maximum fees that a mortgage broker can charge you for their services are • contact Keystart on regulated by the Finance Brokers Control Act 1975. 1300 578 278 or visit the • Find out in writing if the mortgage broker receives a commission or other benefits, Keystart website at (such as profit sharing) from the lender for negotiating or managing the loan. www.keystart.com.au Brokers are sometimes paid for the length of time the loan remains with the lender. • A mortgage broker should act in your best interest. By law, the broker must tell you if they have any involvement in the transaction, other than as your agent, or if they know anybody else who is involved in the transaction, for example employees of the broker or members of the broker’s family. Consider whether these associations might affect the broker’s ability to act in your SHOPPING AROUND best interest. FOR FINANCE • A mortgage broker should carry out all relevant instructions. Ways you can shop around for Instruct the broker in writing to find you a loan that best suits your circumstances finance include: and ask the broker to explain in writing how they make any recommendations. • checking television, newspapers and the internet to find out whether lenders are offering any special deals, such as Keystart; • checking various consumer and finance magazines; FOR MORE INFORMATION • considering the comparison rate for loans (see page 22); and ABOUT MORTGAGE BROKERS: • using the services of a mortgage • contact ASIC on 1300 300 630 or broker (read on for more • visit its consumer website: www.moneysmart.gov.au information).

CHOOSE A MORTGAGE BROKER carefully

www.commerce.wa.gov.au [ PAGE 21 ] THE COMPARISON RATE A comparison rate is a figure that gives you a better idea about how THINK CAREFULLY much you are really paying for credit and allows you to compare the cost of BEFORE SIGNING A CREDIT credit for loan products from different lenders. Comparison rates apply a standard CONTRACT, as there is formula that uses the fees, charges and annual interest rate applying to a loan no requirement for a product (using specific loan amounts and loan periods) to obtain a single cooling-off period in WA percentage figure.

[ The Code requires lenders to supply

SECTION their own list of comparison rates to consumers with applications for fixed

]

term credit. However, it is recommended that you PLANNING treat the comparison rate as a guide THE CREDIT CONTRACT AND INFORMATION only, particularly if you are choosing a THE CONSUMER CREDIT Before you sign a credit contract, the loan with optional features that attract CODE Code requires that lenders give you the fees. The comparison rate does not Once you have selected a lender, you following information to help you make take into account government charges, may be given a finance contract to sign. good credit choices. mortgage insurance, or fees that Make sure you read, understand and • You must be told about fees and cannot be determined at the start of accept the terms of the contract before charges, if these are known before a loan. You should also note that the you sign it. Obtain legal advice from a the contract is signed. comparison rate does not apply to lawyer if you are at all unsure. • The contract should set out how the credit cards and may not apply to home Remember, THE LAW DOES NOT interest charges are calculated and equity loans. REQUIRE THAT CREDIT CONTRACTS how often these charges are made. CONTAIN A COOLING-OFF PERIOD. If • The contract may allow for changes the credit contract does not include a to be made to the interest rate and FOR MORE INFORMATION cooling-off period, you cannot get out credit fees and charges. of a credit contract because you have • If the contract allows for new changed your mind. charges to be made, the contract ABOUT COMPARISON RATES: Most loan contracts for residential should specify how you would be • contact ASIC ON 1300 300 630 and homes will be covered by the National notified of any changes or new ask for a copy of Comparison rates – a Credit Code. We’ll call it the Code for charges. consumer guide and comparison short. Some information about how • If mortgage insurance is required rates – frequently asked questions. the Code protects you before and after under the contract, you must be told signing a credit contract is provided. the name of the mortgage insurer and the amount payable, or how the insurance is calculated. Information about fees and charges The Code and your rights and obligations may be given to you separately or included with requires that the credit contract. Read through these statements before you consider signing a credit contract. lenders give you information to help you make good credit choices

[ PAGE 22 ] www.commerce.wa.gov.au YOUR RIGHTS AFTER SIGNING A CREDIT CONTRACT

THE CONSUMER CREDIT CODE PROVIDES SOME LEVEL OF PROTECTION IF SOMETHING UNEXPECTED SHOULD HAPPEN

THAT AFFECTS YOUR ABILITY TO REPAY YOUR LOAN OR IF THE CONTRACT IS 'UNFAIR'.

LISTED BELOW ARE SOME TYPICAL CONCERNS AND HOW THE CODE MAY HELP.

Q. Can I get out of a loan after who signs a contract, called a If you can't pay your loans I have signed it? guarantee, with a lender. The due to temporary illness, A. If you have only signed an offer guarantor promises to repay the unemployment or relationship to borrow, you can withdraw that loan if the borrower is unable to breakdown and you haven’t [

offer before the lender accepts pay. been able to negotiate a new SECTION it. Upon the lender’s acceptance Generally, lenders ask for a repayment arrangement with 1

of an offer to borrow, you will guarantor where they believe your credit provider, you can ask ]

not generally be able to get out there is a greater than average them to ‘vary’ the terms of your

of the loan. risk that the borrower may loan contract by completing one PLANNING not be able to make their of their hardship variation forms Q. Who can change a loan repayments on the loan. or by using a sample letter contract? The guarantor may be asked requesting a hardship variation A. There are different ways that a to list assets, such as a family from www.moneysmart.gov.au. loan contract can be changed: home, to provide as security for After you apply for a hardship • Changes by the lender the guarantee. If the borrower variation, the credit provider If the contract allows and is unable to repay the loan, must respond to your request the legal requirements for the lender can take possession in writing within 21 days. If your giving notice are followed, of, and sell, any of the assets credit provider refuses your lenders can make changes owned by the guarantor that hardship application, it must give to the contract, such as have been listed to repay the reasons. varying the interest rate or debt. IIf you think the reasons repayments. The Consumer Credit Code provided are unfair, you can • Changes by the borrower outlines rules to ensure that make a complaint to the You can ask your lender guarantors are made fully aware Financial Ombudsman Service, or to agree to change the loan of their potential obligations the Credit Ombudsman Service contract. If the lender agrees, when signing a guarantee. Limited. the lender should give you a Guarantors should be given notice showing details of any an information notice headed Q. Where can I get more help agreed changes. ‘Things You Should Know About with loans? If you are unable to repay Guarantees’. Guarantors should A. If you have a dispute that you your loan because you are also be given a copy of the are unable to resolve with the suffering hardship, such as if contract or proposed contract. lender, need help making a you are sick or unemployed, In Western Australia, a hardship variation to your loan you may be able to get your guarantor can withdraw their or you think that your contract lender to agree to change your guarantee at any time before does not comply with the Code, contract. You can contact credit has been provided. consider: Consumer Protection for help • calling ASIC's Infoline on in dealing with the lender. Q. What should I do if I’m late 1300 300 630; If you and your lender still making repayments and the • making an enquiry at cannot agree, you may be lender threatens legal action? www.asic.gov.au/question; and able to make an application A. If this happens, the most • seeking independent advice from to the State Administrative important thing to remember is a lawyer or financial counsellor. Tribunal for an order to vary to be upfront and honest with the contract. the lender. If you explain the problem, you may be able to Q. What is a guarantor? come to an arrangement with A. A guarantor is someone (for the lender. example, a parent or relative)

www.commerce.wa.gov.au [ PAGE 23 ]

Carol and Geoff and have a young son. Carol have been married for two years Carol and GeoffAfter some time, with their situation worsening, decided to see Carol and Geoff counsellor to come up with agreed to work with the financial Geoff was able to find some extra work on weekends to help pay the bills, As the credit cards were paid off, Geoff was able to leave his second job and

BUYING A HOME IS A LONG-TERM COMMITMENT! and Geoff combined income is more than both work outside the home and their the couple were enough to cover their monthly mortgage repayments. However, meet. The stress between the couple finding it harder and harder to make ends son was also feeling the tension. was beginning to mount and their young their money was going and The couple were not sure where a financial counsellor. relied heavily on their credit cards. also returned their credit cards and a budget that they could live with. The couple offthe banks agreed to a payment plan to pay their considerable debts. This would take some time, but Carol and Geoff were determined to get back on track and were so relieved that their problems were finally getting sorted out. electricity and the yearly rates. The couple continued to make their like water, mortgage payments. It was hard at first to stick to the budget, but the couple found it easier as it became part of their routine. had more time to spend with family and enjoy their home. case study www.commerce.wa.gov.au ]

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[ SECTION 1 ] PLANNING