September 12, 2014
When buying your first home, it is easy to get caught up in the excitement of searching for the ideal property and placing a bid.
And while finding the right property is both exciting and challenging, it is certainly not the only thing you need to consider when purchasing your first home – nor is it the only expense you can be expected to pay.
When travelling down the path to home ownership, borrowers need to be aware of the extra expenses that can arise on top of the property purchase price and the associated deposit.
These extra expenses can include stamp duty costs, legal expenses, removalist costs, insurance, furniture, etc. that should be taken into consideration. The best way to keep on top of these added extras is to factor them into your overall budget from day one.
By keeping these costs in mind when buying a property, you can hopefully avoid delaying your home purchase plans and/or struggling to meet your loan repayments or other financial commitments because your initial budget didn’t factor in some leeway.
Here is a list of the extra costs that you may encounter when purchasing your first home.
Stamp duty – One of the biggest costs outside of a property’s purchase price is stamp duty. It is a state government tax that covers a range of transactional costs and is payable regardless of whether you’re buying your first or a subsequent property. Some first homebuyers, however, may find that they are eligible for stamp duty exemptions or concessions when purchasing new or off the plan in relation to the NSW First Home Owner Grant. You can contact your mortgage broker or Office of State Revenue for more information.
Title registration fee – This is a state government charge to register the transfer of title of the property from one person to another and the fees for registering a mortgage. The buyer meets these costs.
LMI – If you are borrowing more than 80% of the total purchase price, you may have to pay lenders’ mortgage insurance, or LMI. This insures the lender against any loss incurred if the borrower defaults and the proceeds of an enforced sale of the security property are insufficient to clear the debt. Some lenders may enable you to capitalise this into your loan, depending on your loan size and deposit amount.
Application fees – Also known as a loan establishment fee, this is payable when you take out a home loan.
Conveyancer or solicitor fee – This refers to the fee charged by the conveyancer or solicitor that homebuyers engage to conduct the legal work involved in buying real estate.
Pest and building inspections – These inspections are conducted by qualified inspectors before exchanging contracts, at the buyer’s expense. Some lenders require them as a condition of loan approval.
Building insurance policy – As a condition of loan settlement, lenders will impose a condition that all security properties are covered under a building insurance policy. The amount of the policy coverage required is the full insurable value of the property.
Removal costs – While this might seem like a small concern when looking at the big picture, every little penny spent counts. Why not your ask family and friends to help with your move – Shouting a meal in thanks would likely be much lighter on your hip pocket.
New furnishings – You wouldn’t want to have a great new home, but no money to furnish it! Be sure to include extra cash in your budget for the essentials and also consider factoring in some money for other items, such as new furniture, white goods etc.
For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711.