Buying a property can be daunting and saving the deposit is often the greatest hurdle, but the next most important question we get asked is, what are the costs you need to consider on top of your purchase price?
There are many costs associated with buying a property, not all may be applicable to you. Your Mortgage Broker will help you understand what fees will apply to your individual circumstances. Here’s our guide to help you navigate the property purchase maze.
State & Federal Government Costs
Purchase stamp duty - Property transfer stamp duty is a tax imposed by the state government that buyers must pay and is calculated on the purchase price of the property. This is a duty for transferring the title of a property. First home buyers may be eligible for significant rebates on stamp duty.
Property transfer fees - Another state government fee is for registering the transfer of title of the property from one person to another. Some states are on a sliding scale, whereas others may charge a set fee.
Mortgage registration fee - This fee is imposed by the Land Titles Office (or equivalent) in each state for registering the lender’s mortgage onto the title record for the property. The borrower pays this cost and it differs from state to state.
Loan application costs
Lender’s Mortgage Insurance (LMI) - Borrowers may have to pay a one off LMI premium if they are borrowing more than 80% of the property value. This fee covers the lender, not the borrower, against any loss incurred due to the borrower defaulting and the net proceeds of an enforced sale of the security property are not enough to clear the debt. This should not be confused with Mortgage Protection insurance, which covers the borrower in the event of death, disability, illness or involuntary unemployment etc.
Loan application fee & valuation - Loan application fees and valuation fees may be charged by some lenders, whilst others may choose to waive these fees, or charge an annual package fee that will cover these costs.
Settlement agent / solicitors fees - As there is legal work involved in purchasing real estate you will required to seek the services of a settlement agent or solicitor. They vary in price so it’s a good idea to ask about costs for searches, settlements & disbursements.
Pest / building inspections - Prudent home buyers will arrange for inspections of a prospective property by qualified inspectors before exchanging contracts. You’ll want to know that the property you’re purchasing is structurally sound, complying with building regulations and that it’s not affected by insect infestations.
Insurance - Some lender’s may insist as a condition of loan settlement that the security property is covered by building insurance. The amount required will be the deemed full insurable value of the dwelling, which protects the borrower (and the lender’s interests) in the event that the dwelling is damaged by fire or some other catastrophe. Strata-titled properties don’t require a separate building insurance policy as the body corporate would take out a policy for the entire block.
Construction loans - As there is a little more work involved for lenders on construction loans there may be some additional fees. Some lenders charge a progress payment fee each time a builder asks for a claim, whilst others add an additional construction loan fee. It is fairly normal to have four to five progress payments and two inspections to ensure the building is in the state the builder is claiming.
Site costs and service connection costs - It’s important to check your building contract very carefully and, if possible, make sure it includes fixed site costs and connection of services. It is quite often assumed that these costs are included in the contract, but not always. There can be unexpected events, such as the need to build a retaining wall or hitting rock, which can add thousands to your site costs. The same applies to connection of services which include, water, power and phones.
For a quick calculation on all your purchasing costs contact your local mortgage broker, Steve Sims 0433 124 081.