Costs of buying an investment property
There are a few costs to consider when buying your investment property. Here’s our handy list so you can budget for them all.
Stamp Duty by state
Stamp duty is a tax charged by the state and territory governments on the purchase value of your home. What you pay will depend on where you live and what you are purchasing. You can find out more on the website of the revenue office in your state or territory and work out what you could be up for with our online Stamp Duty Calculator.
You will need to cover the expense of a solicitor and/or conveyancer. This includes having the sale contract, mortgage document and any other legal documents prepared. It’s important to bring in the professionals for this work as small legal mistakes can end up costing a lot of money.
Pest and building reports
This is one of the well-known upfront costs when buying a property. Before you buy, it’s good idea to check for structural soundness via a building inspection and ensure there will be no expensive termite repairs in the near future. Usually these are done together to save money, however if the property is in a regional area, you may have to pay more.
A buyer’s agent works for you to find the right property, negotiate the price and purchase a property on your behalf. Their advantage is they can have the right contacts to find a property fast. Sometimes they can quickly jump at properties that aren’t even on the market yet and help you make an offer before the competition.
Home loan fees
Surprisingly, some lenders may charge you a fee for simply applying for a loan. It’s a good idea to try to avoid this fee or have it waived if you can. You’ll discover that while many loans don’t have application fees, some do. Your broker will be able to help you navigate here.
If your home loan is worth more than 80% of the purchase price, your lender will usually ask you to pay Lender’s Mortgage Insurance (LMI). This insurance provides protection to lenders in case you default on your payments. The amount you will be required to pay will depend on the size of your loan, the type of property and your chosen lender. It's typically charged as a one-off premium, which you may be able to include in your overall loan amount.
The mortgage registration fee varies between states. The fee itself is the charge on registering a home loan, thus the property acts as security on that loan.
The government requires the home loan to be registered so that future claims on the property can be checked.
While there are some costs involved in finding and buying the right investment property, don’t let fees keep you from your property goals. To find out more, speak to an Aussie Broker.
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- Chapter One : Things to consider before investing in property
- Chapter Two : Determining where to invest
- Chapter Three : Investment Properties by Dwelling Types
- Chapter Four : Finance for Your Investment Property Purchase
- Chapter Five : How to Invest in Property
- Chapter Six : Adding Value to Your Investment Property
- Chapter Seven : Positive and Negative Gearing
- Chapter Eight : Getting Your loan
- Chapter Nine : Selling your Investment Property