It takes a lot more than a deposit to buy your home. And it pays to be financially prepared for the range of other upfront expenses that can be easy to overlook. Here’s what you need to know.
1. Loan establishment fees
There’s a big variation in the upfront fees charged by lenders, which can comprise application fees, solicitors’ fees and valuation fees. It all adds to the cost of your loan. The good news is that your local Aussie broker can tell you straight up how much each lender charges to get your loan up and running.
2. Lenders mortgage insurance (LMI)
If you borrow more than 80% of your home’s value, chances are you’ll be asked to pay LMI. It’s a type of insurance that protects the lender, not you, if you can’t keep up the repayments, and the cost can be substantial depending on the size of your deposit. You may be able to add LMI to the loan balance and pay it off gradually over time. But do speak with your Aussie broker to know exactly what you’re up for in LMI so you can make plans to tackle the expense.
3. Stamp duty
As stamp duty is a state-based tax it varies according to where your new home is located. Aussie’s stamp duty calculator can show exactly how much you need to allow for stamp duty. If you’re a first home buyer, you may be entitled to stamp duty concessions in some states. Your Aussie broker can explain more.
4. Legal fees
Buying a property involves a fair bit of behind-the-scenes legal work to transfer the property into your name. However, it pays to have your legal team lined up at an early stage so the contract of sale can be reviewed before you sign on the dotted line. The costs of conveyancing vary widely – ask friends and family for service providers they recommend.
5. Pre-purchase building and pest inspections
The last thing you need is a home with a serious pest infestation, or worse, structural problems, so be prepared to organise a pest and building inspection before you commit to a property. Simply Google ‘pest and building reports’ to find providers and costs applicable to your area.
6. Building insurance
Your home is a valuable financial asset, and it pays to allow for premiums on home building and contents insurance as soon as you take ownership.
7. Rates adjustment
On settlement day you may be asked to pay a portion of the council rates owning on the property. Your legal expert can let you know exactly how much this will be.
8. Utilities connection
Don’t overlook the need to pay for utilities like power or gas, and internet to be connected to your new home.
9. Moving costs
When moving day comes around you may be able to convince a few mates to lend a hand for the price of a carton of beer. Or, if you choose to use professionals, do compare price as there can be a big variation in the expense. Completing as much packing as possible yourself can reduce the final bill.
10. Quick fix-ups
No matter whether you want to give the place a quick lick of paint or you find the sofa isn’t the right size for the living room, it’s a fair bet you’ll need to outlay additional cash to have your home just right shortly after moving in. Consider having a slush fund for these types of costs so you can call the place ‘home’ straight away.
Your local Aussie broker understands the home buying process, and can answer your questions about the hidden costs of home buying to help you plan ahead.