The Hidden Costs of Buying a Home
Buying a home is one of the biggest purchases you’ll make in your life. While saving for a deposit and getting finance pre-approved will help the process go more smoothly, there are a number of hidden costs that may stop everything in its tracks. When you’re buying a home, how much money should you put aside for unforeseen costs?
Stamp duty
The amount of stamp duty you have to pay when you buy a home varies from state to state. Stamp duty is charged at loan settlement. The cost varies depending on the cost of the property but it can run into several thousands of dollars. If you are a first home buyer, you may be eligible for stamp duty concession.
Legal fees
When you buy a home, you need to transfer ownership from the seller to the buyer. The process is called conveyancing and it is usually undertaken by specialist lawyers. A conveyancer will also perform searches to determine if your property will be affected by any major developments.
A conveyancer will carry out:
- title searches
- searches of local and state government departments
- preparation of all legal documents
- preparation of settlement statements.
The cost of legal fees will depend on a number on a number of factors and will involve numerous searches. While there are DIY kits available, it is advisable to hire a solicitor. You may be looking at an outlay of between $1000 and $2000.
Building and pest inspections
Before you buy a property, building and pest inspections should not be overlooked. If you don’t get them done you could be setting yourself up for some big problems and costly mistakes in the future. Strata inspections are also advisable if you’re buying an apartment or townhouse. The cost for building and pest inspections is around $500.
Loan fees
The loan product you choose may be subject to a number of lender fees, so it’s important to read the fine print and ask questions before you sign anything. The types of fees you may encounter include:
A valuation fee
If your new home is used as security against the loan, your lender may charge a valuation fee that assesses the property’s worth. Expect to pay around $300.
An application fee
Most banks and lenders charge a fee to cover credit checks and process the initial application. The cost depends on the provider, but most charge up to $600.
Service charges
These charges depend on the loan type, but they run from $10 to $20 per month.
Lenders’ mortgage insurance
Generally if you borrow more than 80 per cent of the home’s worth, you may need to pay lenders’ mortgage insurance. The amount varies depending on the institution, loan type, the value of your property and how much deposit you’ve saved.
Lenders’ mortgage insurance provides protection for the lender and shouldn’t be confused with mortgage protection insurance, which covers you if you miss payments due to sickness or injury.
Research is the key
Buying a home is never as easy as just paying the asking price; there are countless fees and charges that pop up throughout the journey. Doing your research, chatting to an expert and having a buffer of at least $10,000 to cover these hidden costs will save you time and a lot of stress.