Home Buying Process: What Not to Do as a Lawyer

Legal professionals tend to assume that reading a contract carefully is the same as financing it carefully. It is not, and the gap shows up in the order you do things: finance first, contract second, settlement last.

This article covers the sequencing mistakes that cost buyers time and money, and the lender-side checks that sit behind them.

Why Should You Get Home Loan Pre-Approval Before Making Offers?

You should get a home loan pre-approval before you bid, because it sets a working loan amount and tells you which lenders will assess your income in the way you need. It is not a final approval, and the lender can still decline after the property is valued.

For a lawyer, the useful part is the income assessment. Salaried employees, partners, barristers and sole practitioners are treated differently by lenders. Partnership distributions and sole practitioner income are commonly assessed on tax returns and accountant letters, while a salaried associate is usually assessed on payslips. Knowing this before you make an offer avoids a surprise mid-contract. Our page on getting loan pre-approval covers how the process runs, and the borrowing capacity page explains what lenders weigh.

The trade-off is that pre-approvals expire and a credit enquiry is recorded each time you apply. Apply once you are serious, not as a casual check.

What Not to Do With the Contract and Finance Clause

Do not treat the finance clause as a safety net you can leave until late. Contract terms set the deadlines, and a valuation shortfall or a delayed assessment can run past them.

You will read the special conditions closely. The lending question is different: has the lender received the contract, ordered a valuation, and confirmed the loan amount in time? Ask your broker to work back from the finance date, not forward from the day you sign. If the date looks tight, you can ask your conveyancer or solicitor about an extension before the date arrives, not after.

Variable Rate, Fixed Rate or Split Rate: Which Structure Suits a Lawyer?

A variable rate moves with the lender's pricing and usually allows extra repayments and an offset account. A fixed rate gives certainty for a set term but often limits extra repayments and can carry break costs. A split loan divides the balance between the two.

Income for many lawyers moves with billing cycles or partnership distributions. A split rate can suit that pattern, with the fixed portion giving a known repayment and the variable portion taking lump sums when a bonus or distribution arrives. The cost is that the fixed portion can be expensive to exit early, and your variable portion still moves with the market.

If you are comparing structures, the getting a lower interest rate page explains how rate discounts are negotiated, and a calculator will show repayments at different rates.

How Does an Offset Account Work Alongside Principal and Interest Repayments?

An offset account is a transaction account linked to your loan, and its balance is subtracted from the loan balance when interest is calculated. You pay interest only on the difference.

Consider a buyer with a $700,000 loan on principal and interest at an illustrative 6.75% p.a. over 30 years. The monthly repayment is about $4,540. If $50,000 sits in the linked offset account, interest is calculated on $650,000 instead, so the buyer pays interest on less while the required repayment stays the same. Any difference is repaid sooner as principal, which shortens the loan if the buyer keeps paying the same amount.

The outcome depends on the balance staying in the account. The trade-off is that a loan with an offset often carries a higher rate or annual package fee than one without, so the benefit has to outweigh that cost. If you hold little cash, it may not.

Lenders Mortgage Insurance: When Do Lawyers Avoid It?

Lenders Mortgage Insurance (LMI) is a one-off premium charged when the loan to value ratio (LVR) is above a lender's threshold, commonly 80%. Some lenders offer LMI waivers to eligible professionals, including lawyers, at higher LVRs.

Eligibility typically depends on the lender's minimum income, proof of registration or a practising certificate, a maximum LVR (often 90%) and a loan size cap. These vary by lender, so check them at the time you apply. A waiver removes the premium but not the deposit requirement. Our pages on LMI waivers for lawyers and no LMI loans for lawyers outline the options.

The trade-off is that borrowing at a higher LVR means a larger loan and higher interest costs over time, even when LMI is waived. Some lenders also price higher LVR loans differently.

Buying Before You Sell: What Not to Do With Timing

If you are buying your next home before selling your current one, do not rely on the sale price to fund the purchase. Bridging finance can cover the gap, but you carry both loans for a period.

Consider a buyer who exchanges on a new home with a 90 day settlement and lists the existing home soon after. The sale is slower than expected. Before exchange, the buyer's broker had already confirmed the peak debt the lender would accept, so the buyer knew the limit. The broker arranged bridging finance with interest capitalised, and the existing home sold shortly before settlement. The buyer paid the bridging interest as a cost of the delay, but settled without breaking contract.

The risk is that if the sale falls well below expectation, the end debt can be higher than planned. Read more on bridging loans for lawyers and buying your next home.

Stamp Duty and Government Schemes: Check the Source

Transfer duty, concessions and first home buyer schemes differ by state and change. Confirm the current rates and eligibility with your state revenue office before you budget, and ask your accountant about any tax questions.

For first home buyers, the federal Home Guarantee Scheme has its own eligibility rules and caps, which you should check on the official government website.

Call one of our team or book an appointment at a time that works for you, and we will map your income, structure and contract dates before you make an offer. You can also book an appointment online.

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