First time home buyers are usually excited and enthusiastic with the prospect of purchasing a property of their own. And because of too much excitement, they tend to underestimate how much buying a home costs or they forget to take into account some important costs aside from the home buying deposit that are essential in dealing with property buying.
Some of the costs are fixed by the state/ territory government or the lender. Examples of these fixed costs are stamp duty and Lenders Mortgage Insurance (LMI). However, some costs, such as legal fees, may deviate and depend on the lender you choose.
1. Stamp Duty
Stamp duty is a tax that differs from state to state and is dependent on the percentage of the purchase price. This means that the amount that one will pay will be based on the purchase price of the property and the location of the property. Stamp duty calculators are useful to determine how much stamp duty one must pay for.
2. Legal / Conveyancing Fees
These fees may amount to a few thousand dollars and fees for such as legal transfer of ownership of the property, contract of sale negotiation and changes, and settlement, are included.
3. Mortgage or Loan Application Fees
Some lenders may charge a mortgage establishment fee to its borrowers.
4. Lenders Mortgage Insurance (LMI)
LMIs are usually paid when an individual borrows more than 80% of the purchase price. However, there are strategies on how one can save on LMI, such as having a guarantor for your mortgage.
Before settlement, many lenders will usually require home insurance at a minimum to be arranged.
6. Pest and building inspection reports/ Strata Search
These reports will help the buyer know exactly what he/she is buying. However, these reports are quite expensive, ranging from a few hundred to thousands of dollars, and are determined by the size of the property and the company used.
7. Utility Connections
Utilities such as water, gas, and electricity are to be set up and these will be paid by the new property owner.
It is also best practice to consult with a professional and expert mortgage broker to help you be aware of what to expect and how you can budget accordingly.
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