Do you know what your property purchase costs are?

Buying a home is an exciting step – and one that can really build your wealth, but it is important to know the costs related to purchasing a home, and budgeting for them as it can quite often go well beyond your initial deposit.

Upfront loan fees
You could be asked to pay a loan application fee and/or valuation fee, depending on your lender. These upfront fees are reflected in the loan’s comparison rate, which makes it easier to compare between different loans and lenders.

Lenders mortgage insurance (LMI)
LMI applies if you borrow 80% or more of your home’s value. Premiums vary according to the size of your loan, your deposit, the type of property and the lender. This one-off cost can often be added to the balance of your loan, and while this can make the premium more manageable you will pay interest on the cost.

Pre-purchase inspections
Your home is a major investment and it is definitely worth organising a pre-purchase pest or building report or a strata report if you’re buying an apartment, villa or townhouse. It could save you some unexpected costs further down the track.

Legal/ conveyancing fees
Unless you have significant legal experience you’ll need to engage a solicitor or conveyancer to handle the process of transferring the property from the seller to you, the buyer. Ask friends or family for recommendations but do shop to compare the cost between providers.

Stamp duty
Stamp duty is levied by your state or territory government, and you’ll typically need to pay it on settlement of your property. As duty can be a major purchase cost so it’s important to understand what you could be up for and budget accordingly.

Home Building Insurance
As soon as you have a financial interest in your home – and that includes paying a deposit when you exchange contracts, it makes sense to take out home building insurance. You can always add contents insurance once you have moved in. Shop around between insurers but remember the cheapest policy isn’t always the best.

Council and water rates adjustment
You and the property vendor (seller) share these costs depending on the length of time each of you is the owner of the place during the settlement period. You’ll be asked to pay this adjustment at the time of handover.

Electricity connection
Buying a new home offers a good opportunity to compare between energy providers to see who offers the best deal for your needs. You may not need to pay a connection fee if you are transferring an existing connection from another property.

Furniture removal
The cost of moving furniture into your new home can range from a case of beer for a few enthusiastic mates to several thousand dollars for a professional removal firm. Doing as much of the work yourself can trim the cost.

To plan for your property purchase costs, contact either Owun, Suzanne, Costa or Anthony on 02 9517 1818 or newtown1@mortgagechoice.com.au. Or, if you feel like dropping in at our office, we are located at Suite 106, Flourmill Studios, 3 Gladstone Street, Newtown 2042. Be sure to share our blog on Facebook and Twitter and let others join the conversation!

Posted in: Home loans

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