When taking out a mortgage, many people forget to plan for the associated home buying costs that come with purchasing a property. So that you don’t get caught by surprise, here are some of the extra home buying costs you’ll need to consider.
Loan application & mortgage set up
- Home loan application fees: Most lenders charge a home loan application fee. The exact amount will vary from loan to loan and lender to lender, but generally covers loan contracts, property title checks, credit checks and attending a settlement. As a rough guide, allow $500.
- Mortgage establishment fees: Lenders sometimes charge a mortgage establishment fee for setting up a mortgage. As a rough guide, allow $200.
- Property valuation: A third party chosen by the lender is appointed to determine the value of your land and improvements. Some lenders cover this cost whilst others require you to pay. As a rough guide, allow $300.
- Mortgage registration: Your Mortgage deed needs to be registered with the government, this is currently $147.
- Lenders mortgage insurance: If you don’t have a 20% deposit to put toward the purchase, the lender will most likely require you to pay for a lenders mortgage insurance policy that covers their risk in the event you default on your repayments. You can use this calculator from Genworth to work out how much.
Purchase fees and costs
- Building, Pest and Electrical Inspection fees: It’s wise to have your property inspected for any structural or electrical problems and for pests (e.g. termites) before you commit to buying it.
- Stamp duty: Governments charge Stamp Duty to transfer the ownership of a property from one buyer to another. The amount you pay depends on the value of the property you are buying. As a general rule of thumb, allow $4000 for every $100,000 of property value or $40,000 for every million. You can use this calculator to work out exactly how much:
- Registration of transfer fee: The new owner of the property needs to be registered at the Land Titles Office which comes with a fee of $147.
- Legal fees: You generally need to pay a Solicitor or Settlement Agent to handle the transfer of ownership of the property on your behalf. Rates vary, but you might like to budget around $3,000 for this.
Ongoing home buying costs
- Home & contents insurance: Most homeowners insure their home and contents against a range of threats such as burglary, fire and storm. Lenders insist that your property is insured while you have a mortgage.
- Life and income protection insurance: Borrowers should consider protecting their incomes and themselves while they have a mortgage.
- Utility costs: Connecting electricity, gas and telephone can attract a fee.
- Council Rates: our local council charges rates to cover garbage collection and a host of other services.
- Water Rates: The water corporation charges rates for the supply and upkeep of water to your property.
- Body corporate fees: If you buy an apartment or Strata Titled property, body corporate fees are charged. Always check these out before you buy as they can be significant – particularly if the building is in need of a major or if there are lifts, pools and other communal facilities that are expensive to maintain.
- Maintenance costs: Don’t forget to make provision for regular maintenance on your home – even if you decide not to undertake significant renovation.