Most people associate purchasing a house with two major costs – deposit and stamp duty. But there are various other costs involved in the purchase of your property.
Deposit: The minimum required deposit is 5% and if you have 20% deposit plus costs, then you can avoid lender’s mortgage insurance. Having said this, you will need more than the 5% as you need to cover other costs (stamp duty, bank fees and so on).
Stamp duty and registration fees: This is the Government costs that you have to pay. Be aware that lenders will not let you add on this cost to your home loan unlike the lender’s mortgage insurance.
Lender’s mortgage insurance (LMI): Anytime you borrow more than 80%, you will need to pay this fee. Refer Lender’s Mortgage Insurance for more details.
Pest and Building inspection: Many of you feel that you can ignore a building and pest inspection. But it is really important to get this done to avoid spending large sums of money in the future.
Bank fees: Bank fees can include application fees, settlement fees, valuation fees, establishment fees and so on.
Sometimes, mortgage brokers may charge you a fee for their service as well.
Conveyancer or solicitor’s fee: You need to engage the services of a conveyancer or a solicitor to help you with your property purchase. They can help you with going through your contracts before you sign them and make sure there are no hidden pitfalls. They also co-ordinate settlement with your bank and the vendor.
They charge anywhere between $600 – $1000 plus title search.
There is one other cost that most people don’t give an allowance and that is the disbursement fee or adjustments. This cost usually creeps up only three to five days before settlement and can range between $1,500 – $2,000. The vendor usually pre-pays fees like strata fees and rates on the property for a whole year. So, when you purchase the property mid-year, you need to reimburse the vendor.
Units: When you purchase units or apartments, you need to get a body corporate or strata report before you sign the contract, so that you can go over years of information to get an idea of costs involved. This report can usually be arranged by your solicitor and can cost approximately $250. But you do need to get permission from the real estate agent.
If you can go over nearly 10 years of information, this gives you an idea of body corporate fees or any other upcoming fees which you may not be aware of. This is very helpful if you are also thinking of renovations post purchase as there could be some restrictions.
Insurance: Your lender will require you to have building insurance prior to settlement and you need to name the lender as a mortgagor. You may also need home and contents insurance once you move in.