January 22, 2015
According to a recent survey by Mortgage Choice*, four out of five future first homebuyers do not feel well informed about the property purchase process. I wonder why!? Buying your first property can be one daunting prospect.
There is a lot to know when buying your first property, so equipping yourself with the right information is your first step.
You may be unaware of the different fees and charges associated with buying a home. The real cost of buying a home is far greater than the actual sale price of the property, so it is important for you to know and understand all additional fees and charges to avoid any nasty surprises.
Know the costs
On top of your deposit, there are a number of other expenses associated with buying a home, which include:
• Home loan application fees
In order to obtain a home loan, you may have to pay an application or loan establishment fee. The cost of this fee will vary depending on the lender you choose, but could be as much as $1,000.
• Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI), which insures your lender against any loss incurred if you default on your home loan, is payable on all home loans when you borrow 80 per cent or more of the value of the property.
• Stamp duty
Stamp Duty is a state government tax and one of the biggest costs you will pay when buying a home or investment property. It’s a one-off cost based on the purchase price of the property and generally paid prior to settlement. As a first home buyer, you may find you are entitled to certain stamp duty concessions, though it is important to note that any concessions do vary from state to state.
• Mortgage registration fee
As a first home buyer, you will also be required to pay an administrative charge imposed by the Land Titles Office or equivalent in each state or territory. This fee is charged for entering (registering) the lender’s mortgage on to the title record for the property. The fee differs from state to state, and ranges from around $85 to $125 per registration.
• Legal fees
When buying a home, your solicitor or conveyancer will charge you a fee to carry out the legal work. Be sure to ask about the costs of searches, settlements and disbursements.
• Pest / building inspections
It is a good idea to arrange pest and building inspections by qualified inspectors before exchanging contracts. The inspections will ensure the property is not affected by insect infestations and it is structurally sound and complies with building regulations.
As a condition of loan settlement, your lender will require all security properties are covered under a building insurance policy.
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