May 09, 2016
Buying your first home is a huge milestone for any Australian. Researching the property market, deciding where and what type of home you want to buy, as well as saving your deposit is a task in itself. But it’s often the extra costs associated with home ownership that can be over-looked by excited first time buyers.
These additional expenses can include stamp duty costs, insurance, legal expenses, removalist costs, furniture, which all should be taken into consideration. But don’t let it be a set-back. The best way to keep on top is to factor them into your overall budget from day one.
By keeping these costs in mind when buying a property, you could avoid running the risk of delaying your home purchase plans or struggling to meet your loan repayments or other financial commitments.
Here is a list of the extra costs that you can expect to possibly encounter when purchasing your first home.
One of the biggest costs outside of a property’s purchase price is stamp duty. This is a state government tax which covers a range of transactional costs and is payable regardless of whether you are buying your first or a subsequent property. However, some first homebuyers may find that they’re eligible for stamp duty concessions or exemptions when purchasing new or off the plan in relation to the NSW First Home Owner Grant. For more information, you can contact your mortgage broker or Office of State Revenue.
Title registration fee
This is a state government charge to register the transfer of title of the property from one party to another plus the fees for registering a mortgage. The buyer meets these costs.
Lenders’ mortgage insurance (LMI)
If you’re 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 not sufficient to clear the debt. Some lenders may enable you to capitalise this into your loan, depending on your deposit amount and loan size.
Loan application fees
Also known as a loan establishment fee, which is payable when you take out a home loan.
Conveyancer or solicitor fee
The fee charged by the solicitor or conveyancer that a homebuyer engages to conduct the legal work involved in buying real estate.
Pest and building inspections
These inspections are conducted by qualified inspectors before exchanging contracts, which is at the buyer’s expense. Some lenders even 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 full insurable value of the property is the amount of the policy coverage that is required.
Other things to keep in mind might include removal costs and extra funds for the new furnishings for your new home!