August 18, 2014
With all the costs related to buying a home, how much do I really need to get started? (I’ve made the assumption you are purchasing in Victoria – if you’re buying elsewhere then check with us because some figures may need reviewing)
There are some general figures that we should allow for first. These are all allowances and can be updated when we have more specific information about your chosen lender and/or your solicitor/conveyancer.
Loan application fee
There are some lenders who do charge a fee and some who don’t. Therefore, before we narrow down the choices of lenders, let’s allow a general figure of $600.
Lender legal fees
Similar to the first point, there are some who do charge and some who don’t – we allow $300
Borrower legal fees
This is to cover your solicitor/conveyancer and we allow $1,500 – some charge considerably less than this but may separate out their costs and the other fees you need to contribute
Registration – Mortgage
This is a State Revenue Office fee (so is not up for negotiation!) – they charge for registering the mortgage
Then there are the costs that depend on your purchase price - so for this example, I have assumed a purchase price of $400,000. If your figure is different to this, please contact me so I can give you figures that relate to your example.
Property Stamp Duty
For a purchase price of $400,000, the full stamp duty is $19,070. Owner occupiers get a reduction down to $16,370 and if you’re a first home buyer owner occupier then you pay $9,822
Registration – Transfer
Another government charge. For our example of a $400,000 purchase price, the transfer registration fee is $1,120.
Your fees so far add up to:
$13,342 - First home buyer
$19,890 - Owner occupier
$22,590 - Investor
Add to this the lender requirement that you need to have a minimum of 5% of the purchase price as genuine savings. So for our example of a $400,000 purchase price, your minimum contribution is now:
$33,342 - First home buyer
$39,890 - Owner occupier
$42,590 – Investor
This will get you to a loan amount required of $380,000 at a loan to value ratio (LVR) of 95%.
At this point it is a good idea for me to leave the conversation and say ‘call me’ to discuss this further because the explanation gets bigger than what I can fit here. But to give you a bit of a start:
Because the loan amount is above an LVR of 80%, lender’s mortgage insurance (LMI) is applicable – this is insurance for the lender in case you default on your loan but you, the customer, pays the insurance premium. Some lenders allow this LMI premium:
- To be added to the loan amount
- To be added to the loan amount provided that the new LVR does not exceed 97%
- To be included into the loan amount up to an LVR of 95%
- To be added to the loan amount provided the base LVR did not exceed 90%
- To be included in the loan amount up to an LVR of 90%
Have you realised it’s a good idea to have a good broker working for you? For more information, contact Peter Ruddock on (03) 9877 6471 or email@example.com