Buying a property is an expensive endeavour in itself, but did you know there are more costs to think about beyond the purchase price alone? While these extra expenses might seem trivial in comparison to the size of your deposit, they can amount to a hefty sum when added up and should be taken into consideration when budgeting for a future home.
Some of these fees are paid upfront, while others are ongoing and need to be paid off gradually. Here’s a list of costs you are likely to encounter on your property journey.
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Stamp duty is a tax owed to the Australian government once property changes hands and is a one-off, upfront payment. It is calculated as a portion of the property sale price based on factors like the location of the property as well as the property purchase price. Note that if you’re a first time home buyer, you might be eligible for some concessions and/or exemptions, depending on which state you live in.
For example, the NSW government’s First Home Buyers Assistance Scheme, effective as of 1 July 2017 exempts first home buyers of stamp duty on existing homes with a value of up to $650,000 and offers some further concessions for new and existing homes with a value between $650,000 and $800,000. Check your state’s legislation to find out if any exemptions apply for you.
The amount of stamp duty you may need to pay will vary from state to state and will need to be paid upfront. For instance, if you are buying a property worth $700,000 in NSW as an owner occupier then you'll likely need to pay $10,768 in stamp duty.
Find out how much stamp duty you might need to pay.
Solicitors and legal conveyancers are tasked with handling all the paperwork associated with the purchase of your home and usually charge an upfront fee for their services. They will work to ensure you’ve fulfilled all the legal requirements necessary to complete the transaction.
Generally, legal conveyancers charge a flat fee whereas solicitors are more likely to charge you for each hour of their time. The pricing difference is predominantly down to the fact that conveyancers are more restricted in the services they can provide - preparing legal advice and documents for property transactions only - whereas solicitors can offer a broader range of advice.
A conveyancer is estimated to cost $1,300 - $1,800 while a solicitor might cost up to $2,500, though prices will vary. Hence, if you suspect there will be no complex issues regarding your property issue, it may be cheaper to hire a conveyancer, but of course, do some research and shop around before deciding. Note that it’s usually a good idea to hire your conveyancer or solicitor once you’ve been pre-approved.
LMI is a fee charged by lenders to borrowers who have a high LVR, or haven’t managed to save a deposit of at least 20% of the property purchase price. It is intended to account for the additional risk these borrowers pose.
Lenders Mortgage Insurance typically costs anywhere between 1-3% of the loan amount and can be either paid off as a one-off lump sum payment, or be incorporated into the principal of your home loan and paid off gradually in the form of higher monthly repayments.
To avoid paying this additional cost, some buyers will use a guarantor or take the time to build up a larger deposit. It's also worth shopping around with different lenders as some will waive LMI fees for borrowers with a 15% deposit.
Calculate how much LMI you might need to pay here.
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Lenders will generally include inspections as part of their loan requirements. This can include building, pest, land and strata report inspections. Building and pest inspections are vital to ensuring the building’s structural soundness and integrity as well as ensuring there are no pest infestations present. Strata reports can inform you about any future costs as well as what repairs or changes have already been carried out to the building.
This is not a cost that should be neglected for the sake of a short-term saving, as while it might seem like yet another fee to pay, it has the potential to save you thousands in the future through the avoidance of repair costs later down the track.
The cost for property inspections can range from $350 - $700. Note that the price of a building inspection can vary depending on how complex the inspection will be and the location of the property as well as the level of detail you request of this inspection. Generally, inspections in metropolitan areas will cost more than inspections in regional ones.
This is an upfront, one-off fee charged by lenders for taking out a loan. Like other costs mentioned, the amount charged can vary from lender to lender, some may charge a few hundred while in some cases, this fee may even be waived. Hence, when looking for a lender, this is a point worth keeping in mind.
Depending on the lender, this could cost anywhere between $600 - $1,000. A Home Loan Specialist can help negotiate a lower or waived application fee.
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Lender legal fees will sometimes be incorporated into your home loan application or establishment fees, though this is not always the case. This fee covers the cost for lenders to hire a legal representative to prepare the loan contract and ensure details and paperwork are in order until settlement has been reached.
Lender legal fees can cost anywhere between $250 to $500.
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Before your loan settles your lender will hire an external, qualified party to value your property and decide how much they are willing to lend you. They do this by writing up a report which takes into consideration any risky elements that could affect the property value, as well as its resale factor.
Depending on your lender a valuation fee can start at around $220 and can increase with the value of the property. It can also vary depending on the location and type of property.
All in all, there are a number of additional fees to consider when saving to purchase a property. Being aware of the full costs to complete the purchase is the first step.
To calculate the added costs for you property purchase, chat with a Home Loan Specialist today.
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