During house hunting, your energy is likely spent on open homes, exploring areas, and settling debates about architecture and commute lengths. It’s normal to prioritize making an offer, before worrying about going unconditional. But, before putting an offer on a home, it pays to be ready for what happens next: Preparing to go unconditional.
What does going unconditional mean?
When you make an offer on a property, it’s often conditional on meeting certain criteria. These could include securing financing, having a building inspection, or selling your current home. These conditions protect you as a buyer, giving you time to make sure everything checks out before you commit to the purchase.
Once all conditions are met and any paperwork is completed, your offer transitions from conditional to unconditional. It marks the point where the property sale becomes legally binding. After this, your deposit is normally paid. ‘Unconditional’ means you can’t just back out, without facing potential financial penalties. It’s vital to be fully informed and prepared before making that commitment.
Why pre-approval is crucial before you make an offer
Ideally, preparing to go unconditional starts, before you even start looking for a home. Before you go house-hunting, finance pre-approval makes it more likely and easier for you to get to the unconditional stage.
In competitive markets, offers often need to be made quickly. Having your pre-approval sorted, means you can confidently make an offer. Knowing the bulk of your financing is already sorted, makes the next steps more seam-less! You avoid scrambling to get everything in place within the typical 10–15-day period, that most sellers allow for conditions to be satisfied. With pre-approval, your mortgage adviser just needs to ensure the bank is comfortable lending against your chosen property.
A pre-approval also gives you a clear limit so you can focus on viewing properties within your price range. This stops you from falling in love with a house that is beyond your means.
A pre-approval saves you stress and helps you make smarter, faster decisions.
Be prepared for extra costs
Beyond your deposit, you should budget for other costs, such as solicitor’s fees, valuations, and building inspections. If you’re relying on a cash contribution from your mortgage provider to cover these costs, remember that those funds aren’t typically available until settlement day. In the meantime, you’ll need to cover these costs yourself.
Make sure you can access your deposit
At the point of going unconditional, the deposit is due. Generally, the deposit is 10% of the purchase price. You might be able to negotiate a lower amount as part of your offer, but this could make your offer unattractive to the seller.
If you plan to use your KiwiSaver for your deposit, contact your provider early in the process. The release of those funds can take up to 20 working days, so you’ll want to factor that into the amount of time you require to secure funding after an offer is accepted. Your mortgage adviser and solicitor can help guide you in accessing these funds.
If you plan to buy at an auction, be aware that KiwiSaver cannot be used to fund the deposit. All auctions are unconditional, and the deposit is payable immediately.
Protect yourself and your investment
When you’re in a position to start looking for a property, think ahead and save yourself a lot of time, effort, and risk.
- Get a mortgage adviser: We will arrange your pre-approval, help you budget, and confirm that your lender is happy with the property you plan to buy. We will then help you structure your mortgage and give you advice throughout its lifetime.
- Find a good solicitor or conveyancer. When you consider purchasing a property, they will guide you through the contract, look for pitfalls, help you understand the legalities, and ensure everything is in order before you go unconditional.
- Budget for your due diligence: A building inspection and a valuation are essential to ensure you don’t inherit costly problems. These are especially important in New Zealand, where weather-tightness issues have been a concern for some older homes. Lenders often require a building inspection before they approve a property, especially if it is older or has problematic construction materials. Remember, spending money on a building inspection costs little compared to the amount it could save you in surprise costs.
Whether you’re thinking of buying a first home, next home, or investment property, Platinum Mortgages can sort the financing for you, freeing you up to focus on finding the right property for you. Get in touch, and let’s get you on your way!
