Property
Everyone knows that buying a home is an expensive process. With additional costs on top of the price of the property to think about, it’s important to have your finances in order to avoid any nasty surprises.
In some cases, the upfront costs for a property valued at $400,000 could be up to 11% of the property's value.
To make sure you’re not caught off guard, here’s a list of the upfront costs of buying a home.
Let's start with the big one. The largest and most notable expense will be your deposit. Of course, this cost will vary depending on the type of property you’re purchasing, as well as its location, size and value.
Most buyers aim to save a deposit of 20% of the purchase price to avoid any extra charges such as Lenders Mortgage Insurance (LMI).
With property prices on the rise, saving this amount could be a difficult task. But, there are other options available if you don’t have a 20% deposit saved.
In some cases, you may be able to avoid paying LMI. For example, professional home loans, which are home loans available to eligible borrowers in specific professions, can waive LMI fees for those who have a Loan to Value Ratio (LVR) higher than 80%.
Depending on your circumstances, some lenders can provide home loans to borrowers who have a deposit as little as 5%.
Keep in mind, in these instances you may need to pay LMI, which we’ll talk about next.
Lenders Mortgage Insurance was designed to protect the lender in the case the borrower defaults on their home.
LMI is typically charged when you have a deposit of less than 20% of the price of the property – in other words if your Loan to Value Ratio (LVR) is above 80%.
Keep in mind that the smaller your deposit, the more you’ll likely be charged LMI.
See how much you might need to pay if you're low on a deposit.
Transfer of property ownership contracts can involve complex legal requirements.
Since October of 2018, conveyancing work for Australian residential property transactions must be completed by a person with the correct legal qualifications. This means you’ll need to hire a conveyancer or solicitor to make sure all contracts and documents are up to scratch.
Conveyancers are generally more affordable than solicitors. This is because conveyancers usually specialise in standard property transfers, whereas solicitors may be required for more complex property transfers.
In Australia, conveyancers will typically charge around $800-$1,400 per property settlement.
In most cases, conveyancers will be able to get the job done and they usually charge a flat fee compared to solicitors who typically charge for their work per hour.
Find out how much stamp duty you might need to pay.
The transfer of property contracts can involve complex legal requirements, so it is worth considering hiring a conveyancer or solicitor to act as your legal representative and make sure all the documents are up to scratch.
Conveyancers are generally more affordable than solicitors as their expertise is specifically the conveyancing process while solicitors may be needed in more complex property transfers. The NSW Housing guide states that conveyancers usually charge from $800 - $2,500.
In most cases, conveyancers will be able to get the job done and they usually charge a flat fee compared to solicitors that are likely to be paid on an hourly basis.
When you apply for a loan, some lenders will charge application and establishment fees for your loan. While some lenders may waive the fee, prices typically vary between $200 and $700.
Additionally, there may be extra costs like valuation fees and survey reports.
Make sure you consider all fees while comparing home loans. Additionally, if you think you might refinance in the next few years, look for a loan that has affordable discharge fees when switching lenders.
If the discharge fees are high, it can make it more difficult to get out of a loan and pressure you to stay on a mortgage that doesn’t work for you as your needs change.
You can ask a Home Loan Specialist for help negotiating these fees or to negotiate on your behalf.
Before purchasing a property, your conveyancer or lender will usually require a property inspection to make sure that the home is in good condition and structurally sound.
The usual inspections include:
If you’re planning to move into your new house, there are multiple costs you’ll need to take into account. These include:
If you have any questions regarding the hidden fees of buying a home or home loans in general, get in touch. Our Home Loan Specialists are happy to help with any questions you may have.
The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
Tags: lmi (lenders mortgage insurance), stamp duty, legal fee, establishment fee, home inspection, pest inspection, building inspection, first home, new purchase
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