The extra costs of buying a home
Apart from saving the deposit, there are additional costs associated with getting a home loan.
Some of these additional fees and costs include:
Some lenders will charge you a fee to submit a home loan application to them.
Home Loan establishment fee
An establishment fee is a one-off payment when you start your loan. It covers the cost of setting up the loan.
Ongoing monthly fees
While ongoing monthly fees are not payable on all home loans, what seems like a small charge each month can really add up over the longer term. Check if the loan you’re considering has these fees.
Building & pest inspections
A building inspection is normally recommended prior to purchasing a home to help identify any issues with the property such as structural damage, mould or faulty wiring. A building inspection fee is a small price to pay for peace of mind and can even save you lots of money on repairs and replacements in the future.
A building inspection can cost around $400. Some companies combine a building and timber pest inspection into the one inspection for a slightly higher fee. A pest inspection will assess the property for infestations such as termites and vermin.
Stamp duty is the amount payable to the state government when property is purchased. The duty payable is based on the market value or the purchase price, whichever is greater.
As of 1 July 2017, eligible first home buyers will pay $0 stamp duty on purchases of $600,000 or less. These changes apply to contracts signed after 1 July 2017. There will be a reduction in stamp duty on a sliding scale for purchases of $600,001 - $750,000. This may differ in different Australian states/territories.
Find out more about the changes to stamp duty for first home buyers on the State Revenue Office website.
Valuation and settlement costs
Some lenders will charge you for valuation and settlement costs when processing your loan application so be sure to ask whether this is the case.
Legal and Conveyancing fees
The transfer of land ownership is usually undertaken with the assistance of a conveyancer or legal representative, such as a solicitor. You won’t require their assistance until you find the property you want and are ready to make an offer but it helps to be organised for when that time comes.
Fees can include costs associated with the time of a representative, Title searches, preparing documents and settlement fees, including rates and water bill rebates to the vendor. The fees associated with these services can vary, however many Solicitors and Conveyancers will offer a fixed price for simpler purchases.
Lenders Mortgage Insurance
Lenders Mortgage Insurance (LMI) is generally required when the loan is in excess of 80% of the property value that you are purchasing. It protects the lender in the event that the borrower defaults on the loan and there is still money owing after the property is sold. If it is required, LMI is arranged by the lender on your behalf and requires a one-off payment that can be added to your home loan.
Depending on the value of the property and the loan-to-value ratio, Lenders Mortgage Insurance may be several thousand dollars. However depending on your circumstances this may enable you to get into the property market sooner.
There can be some costs associated with moving house including removalist fees, changing the locks and buying new furniture.
It makes sense to protect one of your biggest assets and your ability to repay your home loan.
Owners Corporation (Body Corporate)
An Owners Corporation (also called Body Corporate) is formed by the owners of a piece of land that is subdivided (e.g. into units, townhouses or apartments). The purpose of an Owners Corporation is to oversee and maintain the common areas in the building such as any elevators, pools, gyms and gardens.
Owners in such properties are normally required to pay an annual Owners Corporation fee and can also be asked to make one-off payments. It is a good idea to get an estimate of the expected Owners Corporation charges you may be expected to pay.
Remember these costs before you start looking for a home and build these into your budget. By anticipating your costs before they happen you’ll have a more accurate assessment of what you can afford.