21/11/2021
Residential Purchase Additional Costs - if you’re a first home buyer you may not be aware of some of these common additional costs that need to be considered in addition to your deposit:
Stamp Duty – is a one-off state-imposed tax payable when you purchase a property. Some states are considering an annual levy instead. Upfront stamp duty can amount to tens of thousands of dollars so it’s best to use a stamp duty calculator or speak to Bryce or I to understand how much you’ll need to pay. Stamp duty depends on 1) Purchase price 2) What state you buy in and 3) whether it’s an investment or owner occupied purchase. Most states offer stamp duty exemptions or concessions to first-time home buyers up to various thresholds. There are surcharges for foreign buyers.
Lenders Mortgage Insurance (LMI) – is generally charged if you are borrowing in excess of 80% of the value of the property, although this percentage varies. The smaller the deposit you have the more insurance you will have to pay. LMI can be avoided by using additional security, such as a second property, or a parents home by way of a parental guarantee. There are also exemptions available to certain industry professionals, such as doctors, lawyers and accountants to name a few.
Insurance – apartments are generally covered by the buildings insurance policy, but when buying a home, insurance becomes your responsibility. Insurance is highly variable and is priced according to risk, for example you will pay more if you’re buying in a forested area because there will be greater risk of fire, or in a flood prone area because there is greater risk of damage from flooding. In addition to building insurance, it is wise to consider other insurance types to protect you and your family from being forced to move out of or sell your new property, for example, life insurance and income replacement insurance.
Loan Application, Establishment, Lender Legal and Valuation Fees – these are the lender costs associated when setting up a loan, which you ultimately pay for. It’s worth comparing bank comparison rates rather than simply the variable or fixed rate as this will better take into consideration the fees associated with a loan. Fees vary greatly from lender to lender and although these costs may be absorbed by some lenders, others can charge thousands. Generally speaking, $600 would cover these costs on most residential loans with most lenders. Valuation fees increase when properties are remote, unusual, or high value. These fees aren’t usually payable until the loan settles, although some lenders will want payment upfront, most commonly for the valuation.
Conveyancing or Solicitor fees – Your Conveyancer or Solicitor can be your biggest asset when you’re buying a property. They work for you, and will inspect the contract of sale and do searches on the property you want to buy. They will look after many of the documents you’ll need to sign such as the transfer of ownership and settlement agreement. Their fees vary from provider to provider, so keep in mind there will be a basic fee, plus costs associated with searches undertaken, plus additional costs when they need to do more work like add a clause to the contract or negotiate with the seller’s legal representative. It’s not uncommon for your solicitor to bill you $2,000 - $3,000 or more for complex matters.
Building/Pest Inspections and Strata Reports – when buying a house it is wise to get a building and pest inspection report, which details the current condition of the property. It provides information about potential issues, which may help you determine what you want to offer, or you might decide to withdraw completely. It will provide you with extra peace of mind, consider budgeting between $250 to $500 per property for this report. When buying an apartment, it is wise to get a Strata Report instead. These highlight known issues in the building, which may be financial or physical problems such as maintenance requirements. Any structural or pest issues that have been identified will show up in this report. A strata report should be no more than $300 but if another purchaser has already ordered one you may get it a lot cheaper.
Council & Water rates – if the current owner has paid these in advance, which is likely, a pro-rated portion will be added to the purchase price at settlement as this is your cost for those services from the handover date.
Land Titles fees - are charged each time there is a change to the title deeds. The title deeds are your proof of ownership of a property and are lodged with a government body, often known as Land Titles. Your lender will have a mortgage over your property, which means it can not be sold without them being paid out. The lender is on title, and each time there is a change, for example a change of ownership, or a change of lender, there is a government charge. These fees vary from state to state. There are likely to be at least two changes required and you can probably expect fees of at least $300.
Discharge Costs - when you eventually pay out your loan, in addition to further fees from land titles above, there will likely be a charge levied by your lender for their costs. This is usually $300 - $400.
By preparing properly and factoring in extra expenses, you won’t be hit with any unpleasant surprises. This list of costs above is meant as a guide only. We will prepare and provide you a document called a Funding Position prior to an application being submitted. The Funding Position estimates costs unique to your situation. Notwithstanding any highly unusual additional costs, this document is designed to make sure you have enough funds to complete the purchase.
Please call Bryce or I to assist with your funding needs.
Warm regards
Marie
Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product. Credit Representatives 503532 and 527885 are authorised under Australian Credit Licence 389328. Our privacy policy can be found at www.funded.net.au
