- Posted 15 Oct
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If you are a first home buyer saving for your deposit, it helps to understand all the costs involved in purchasing a home. Home loans are important, of course, in helping you decide where you want to live and an upper limit of the home you can afford. But there are many other fees involved. Here are the true buying costs associated with a new home purchase:
Mortgage loan fees: Different lenders charge varying fees for a mortgage application.
Legal fees: Expect to pay a few thousand dollars in legal fees that cover sale negotiations, property transfer paperwork, and settlement.
Stamp duty: A stamp duty is levied on all Australian properties, but rates and legal terms vary between states and territories. In some cases, a first home buyer may be exempt, but it’s best to check the specifics for your region.
Lender’s mortgage insurance (LMI): If your deposit is less than 20 per cent of the sales price, expect to pay LMI. One way to avoid this fee is to have a family member or other supporter guarantee a portion of the loan. For instance, if you put down a 10 per cent deposit and borrow 90 per cent of the home’s value, getting a guarantee for the other 10 per cent can save you from paying LMI.
Due diligence fees
This group of fees includes title reports, home inspections, and pest reports. These fees are usually a few hundred dollars, but can add up to thousands depending on the size of the property and its location and condition.
Strata title report: A strata title is relevant if you are purchasing a unit in a multifamily building. If a strata report has already been completed for the building, you may be able to just pay a fee and download the report. If this is the case, the price will probably be in the $200 range. If no report exists, you’ll need to schedule a separate inspection, which will cost more.
Home inspection: This report looks for defects in the property, safety hazards, and things that are not up to code. A good home inspection can tell you if the property is in good shape or has major problems that need to be addressed.
Pest report: A check for evidence of termite and other pest damage. Even if pests are not currently active, there may be existing property damage that needs to be addressed.
You’ll probably have to pay set up fees for gas, water, and electrical utilities. Depending on your credit, you may also have to pay a deposit of a few hundred dollars.
Finally, you’ll need to pay for a home insurance policy to protect your investment and the financer’s stake in your property. You can also choose optional mortgage protection insurance, which helps families continue to make payments in the case of emergencies.
Some of these fees are unavoidable, but by shopping around you may be able to save hundreds of dollars. It pays to get a few quotes from licensed service providers before making a decision.
If you’re planning to purchase a home, contact Australian Credit and Finance and let our experts help. We can get you the loan that meets your needs at a very competitive rate.