Home buying costs you haven’t considered
Saving a deposit for your home loan is the first (and often biggest) step to owning your own home, but have you considered the other costs involved?
Check out the home buying costs that often fly under the radar so you can be one step closer to popping the champagne on auction day:
Home Loan establishment fee
An establishment fee is a one-off payment when your loan is approved which covers the cost of setting up the loan.
Ongoing monthly fees
Some lenders charge a fee to service your loan. And while small ongoing fees might seem like an inconsequential charge each month, they can really add up over the long term. In fact, an $8 monthly loan fee over a 30-year loan term will cost you $2,880. This fee isn’t applicable for all home loans so check if the loan you’re considering will charge this.
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 save you 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.
Also known as Land Transfer Duty, stamp duty is the amount payable to the state government when property is purchased. The duty payable is based on the property’s value, what you are buying the property for (e.g. investment or to live in), whether you are a foreign purchaser and if you are entitled to any concessions or exemptions.
Find out more about stamp duty in Victoria 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. 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 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, LMI 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. If you have good friends and family that will lend you a hand, the cost of a pizza dinner is much cheaper than hiring a van or removalists.
It makes sense to protect one of your biggest assets and your ability to repay your home loan and in fact most lenders require the home to be covered by insurance in case the unexpected happens.
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.
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