When buying a home, you know you will need a deposit but there are other costs you should consider. The costs listed in this article can vary depending on many factors. It is important you do your own research into each cost to get an idea of how much you will need to pay. You should also consult with your financial expert (mortgage broker, accountant, financial adviser, conveyancer, legal adviser) to get a more precise idea of your final costs you will pay.
Stamp duty
Stamp duty is a duty payable to the state or territory on transfer of the land or other property and is one of the biggest extra costs you will need to pay when buying a house. The amount of stamp duty will differ for each state and territory, depending on a number of factors including the property price, whether the borrower is a first home buyer, or whether it is an existing property or a new home. Some states may offer stamp duty concessions for first home buyers. Find out if you are eligible for these concessions through your financial expert for personalised advice.
Mortgage registration fee
A mortgage registration fee is paid to formally register a mortagee’s security interest against your property. This fee varies between each state and territory.
Transfer fees
Transfer fees cover the cost of transferring the title to the property from the seller to you. This fee will differ by state or territory.
Loan application or establishment fee
Your lender may charge you a loan application or establishment fee. This fee covers the lender’s administration costs for setting up your loan application. The fee will vary by lender and may vary depending on the loan amount.
Valuation fee
Valuation fees may be payable if you or the lender engage a valuer to provide a valuation for the property you want to buy. This will vary by valuer and may also depend on the location of the property.
Lenders mortgage insurance (LMI)
If you do not have 20 per cent deposit plus the cost of any associated fees and duties, your lender may require you to pay for Lenders Mortgage Insurance (LMI). LMI covers your lender in case you default on your loan repayments, and they can’t recover the outstanding loan amount from the sale of the home. The lender will usually pass the cost of the LMI premium to the home buyer as an upfront fee payable at loan settlement. However, some lenders may provide a monthly payment option that allows you to pay the LMI fee cost monthly, until your loan has been paid down to below the loan-to-value ratio (LVR) determined by your lender, or until the loan is discharged. You can estimate your LMI fee with Helia’s LMI fee estimator.
Buyer’s agent fees
A buyer’s agent may be able to help you with your search, work to your budget, and negotiate the purchase on your behalf. If you use a buyer’s agent to find your home, you may need to pay them a fee. They may charge a flat fee or a percentage of the property price.
Inspection costs
You may engage building and pest inspectors before you buy your home. The cost of building and pest inspections vary depending on your location and the size of the property. You may also engage a strata inspector if you are buying an apartment.
Conveyancing or legal fees
Most home buyers will typically engage a conveyancer or solicitor to handle the legal paperwork required for settlement and transfer of their new home. These fees vary a lot depending on many factors, including complexity of the transaction, and if additional property-related searches are required before settlement.
Home and contents insurance
Your lender will likely require you to have home insurance to protect the value of your property. You may also want to consider contents insurance. The cost of your insurance will vary a lot depending on many factors. You can use a comparison website to find the best home insurance options for your circumstances.
Cleaning & repair costs
Before you move into your new home, you may have to do some repairs. It is important to get a few quotes to make sure you are paying a fair price for the repairs. You may also want to hire professional cleaners to make sure you have a fresh start in your new home.
Service connections
Before you move into your new home, you will need to connect your internet, electricity and gas. Each of these services may charge you a connection fee.
Moving costs
The cost of moving into your new home will vary depending on how far you are moving, how much furniture you are moving and if you are engaging professional packers and movers, hiring a truck to move yourself, or if you have some good friends who will help you move (in exchange for a pizza party in your new home at the end of the day, of course). Compare several removalist quotes from different companies to make sure you find the best deal for you.
Investment property management costs
If you are buying an investment property, and you choose to engage an agent to market, lease and manage your property, you will need to pay fees to them for their services.
Case Study
Dylan and Ben saved up to buy their first home. Unsure how much they could afford to borrow, they contacted a mortgage broker.
The mortgage broker explained that, after allowing for payment of stamp duty*, conveyancing fees and other upfront costs, they had an $80,000 deposit and could purchase a property up to $800,00 with help from Lenders Mortgage Insurance (LMI).
CRUNCHING THE NUMBERS
Home price: $800,000**
Saved deposit: $80,000
Loan amount: $737,712**
Incl. estimated LMI fee: $17,712***
Monthly repayments: $4,115****
LMI ONLY RAISED THEIR MONTHLY MORTGAGE REPAYMENTS BY $99*
With the help of LMI, Dylan and Ben now own their own home. They were able to stop paying rent and start building equity.
* The amount of stamp duty payable will vary depending on the Australian state/territory where the property is located. First home buyers should also consider their eligibility for assistance from relevant federal, state or territory government schemes.
** Loan amount based on 90 per cent LVR plus the LMI fee which is capitalised into the loan. Excludes stamp duty and other costs of purchase. Assumes that no other fees and charges are payable. Lending criteria and conditions apply to approval of credit products.
*** LMI is capitalised into the loan. The actual LMI fee may vary from the estimate depending on a range of factors including, the loan purpose, borrower type, security type or updated information received at the time of the application.
**** Estimated monthly repayments based on a 30 year loan at an interest rate of 5.34% p.a. Variable rate subject to change over the loan term at the lender’s discretion.
Source: It’s my home magazine
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