The hidden costs of buying a property
From stamp duty to building inspections, the list of hidden or less thought about home purchase costs can be quite extensive. InfoChoice has listed a few of those costs for you, so you won’t be inundated with all sorts of unexpected expenses when it comes time to purchase your property.
Home Loan establishment fee
An establishment fee covers the cost of the documentation and set up of the new mortgage.
It is a one-off payment made when your loan is approved.
Ongoing monthly fees
Some lenders charge a minimal monthly fee to service your loan. Even though the fee may be quite small, it all adds up in the long run. Not all home loans have this fee payable, so check if the loan you’re considering includes this as a charge.
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Lenders Mortgage Insurance
Should your loan be in excess of 80% of the property value that you are purchasing, Lenders Mortgage Insurance (LMI) is generally required. It protects the lender (not the borrower) in the event that the borrower defaults on the loan and there is still money owing after the property is sold. LMI is a one-off payment that can be added to your home loan at the time of loan settlement.
Valuation and settlement costs
Check with your lender to ascertain whether or not they will charge you for valuation and settlement costs when processing your loan.
Legal and Conveyancing fees
Once you have found a property that you are ready to make an offer on, you will need the assistance of a conveyancer or legal representative, such as a solicitor. They will facilitate the transfer of land ownership.
Fees can include costs associated with Title searches, preparing documents and settlement fees. The fees associated with these services can vary.
Stamp duty is the amount payable to the state government when a property is purchased. It is also known as Land Transfer Duty. The amount payable is based on the property’s value, whether you are buying as an owner occupier or investment, whether you are a foreign purchaser and if you are entitled to any concessions or exemptions.
Work out how much stamp duty you may have to pay with the free InfoChoice calculator.
Most lenders require the home to be covered by insurance in case something unexpected happens.
A home insurance policy covers the costs associated with rebuilding the home's structure in the event of a potential hazard.
Don’t forget your contents insurance as well. Contents insurance covers the financial cost of replacing household personal items and furnishings. Some examples of items covered are: curtains, furniture, white goods, TV, computers and other electrical appliances, clothing and jewellery.
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Owners Corporation (Body Corporate)
If your land is subdivided (e.g. into units, apartments or townhouses) an Owners corporation may need to be formed. This is also known as Body Corporate.
The purpose of an Owners Corporation is to oversee and maintain the common areas in the building such as any elevators, gyms and gardens.
An annual Owners Corporation fee is required and you can organise to pay this in a once off fee or quarterly or half yearly instalments.
It is a good idea to get an estimate of the expected Owners Corporation charges you may be expected to pay.
Building and pest inspections
Prior to purchasing a home, it’s a good idea to have a building inspection carried out.
A building inspection fee is a small price to pay for peace of mind and can save you money on repairs in the future. Building inspections help identify any issues with the property such as faulty wiring and structural damage.
Investors will gain peace of mind, knowing that what they're buying isn't going to collapse around them.
Building inspections can cost around $400-$500. A combined building and timber pest inspection is usually available at a slightly higher fee. A pest inspection will assess the property for infestations such as termites and vermin.
As you can see, there are many hidden or unexpected costs that you should be aware of and that you will need to budget for, which you can do so by using the InfoChoice Budget Planner. By making yourself aware of all costs associated with property purchase, you should be able to maximise your borrowing power and ensure you buy the house you want at the price you can afford.
This update is not financial advice. This article is general news and information.
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