There are often costs involved in purchasing a new property that people are not aware of. It is important to consider the extra costs so you are not left short at settlement.
Lenders fees & charges
Loan Application Fee
Many lenders will charge a loan application/approval fee. This will vary between lenders and between loan types, securities, loan splits and will also depend if you are going on a ‘package’ with the lender. Most of the time the loan approval fee will include the cost of the first valuation, if for any reason you require additional valuations and they are not included the cost of a valuation can vary and usually ranges between $150-250. Some lenders will ask for these payments upfront to cover costs.
Lender’s Mortgage Insurance (LMI)
LMI is payable for loans with a Loan Valuation Ratio >80% and are sometimes payable on low doc loans. This insurance is payable by the applicant and covers the bank in the event the borrower defaults and the net proceeds of a mortgagee sale are insufficient to cover the debt. LMI can often be financed into your loan and should not be confused with Mortgage Protection Insurance or other forms of insurance that protect the borrower in the events of death, disability, illness, injury or involuntary unemployment.
Government fees & charges
Property Stamp Duty
Property transfer stamp duty is a state government tax. This is payable by the purchaser and is calculated on the price the property has been purchased for, for and investment property in WA purchase for $450000.00 the stamp duty premium is $17290.00. Property Stamp duty is payable regardless of whether you have a mortgage or not. Some First Home Buyers may be eligible for a stamp duty rebate.
Property Transfer Fee
This is also a state government charge. The Property Transfer Fee is to register the transfer of title of the property from one party to another. This fee varies from state to state and can be a set fee or on a sliding scale. In WA this fee is on a sliding scale starting from $164.
Mortgage Registration Fee
The Land Titles Office will charge a fee for registering the lender’s mortgage on to the title. This fee also varies from state to state and is payable by the borrower.
While some people act as their own settlement agent most will enlist a conveyancer or solicitor to carry out the legal work that is involved when purchasing a property. The solicitor/conveyancer will charge a fee for their service and there will also be costs associated with the transfer that will vary from property to property. Settlement costs, while they vary, are generally between $1500-3000.
Building and Pest Inspections
Most buyers will arrange for a building and pest inspections to sure the property they are purchasing is structurally sound & not infested with pests. The contractors will charge a fee for their services and this is payable by the buyer and would likely cost about $500. Some lenders may ask for a satisfactory building and pest inspection to fulfil their loan approval criteria.
Lenders will impose a condition that all security properties are covered under a building insurance policy. All insurance premiums are payable by the borrower. If a property is strata-titled the lender will require evidence that the body corporate has taken a policy for the entire complex.
Due to the complexity and additional work required with a construction loan and progress payments including additional valuations lenders will generally charge a ‘progress payment’ fee or a larger approval fee. This can be a one off fee or payable per progress draw or inspection, each lender is different but it will cost approximately $400 more than a standard purchase.
Site Costs and Service Connections
It is imperative to check your building contract carefully. If at all possible, ensure it includes fixed site costs and connection of services such as phone, water, electricity etc. Many builders allow for about 5-10 meters for connection from the street to the dwelling, this is usually ok for standard residential blocks but can be very expensive for a large or rural block. Unexpected events can occur during construction such as damage to retaining walls and needing to rebuild them, if they are not covered in the building contract and could cost a lot of money.
If you are thinking of buying or building a new house, please contact me on
M: 0447 277 321
Tara Williams - Your local mortgage broker located in Newman servicing Karratha, Port Hedland, South Hedland, Tom Price, Paraburdoo, Broome, Newman, Kununurra, Derby, Dampier, Pannawonica, Roebourne, Wickham, Cable Beach and Wyndam