THE REAL STORY: THE FULL COST OF BUYING A HOME

Purchasing a home is the first step to realising this dream however it can also be the biggest financial commitment you will ever make. The challenge for many homebuyers is understanding all the costs associated with purchasing a home.

While the mortgage is the largest, most obvious cost, there are many smaller costs which may catch a homebuyer unawares, significantly changing the amount of money needed up front. Its important for any homebuyer to do their homework and understand all the costs involved to ensure there are no surprises.

So what are some of the costs associated with purchasing a home? Here are a few considerations:

Mortgage Associated Fees

• Loan Application fees – will depend on the type of loan you select, up to $1,000

• Valuation fee – assesses the value of your property, up to $500

• Mortgage Stamp Duty – payable on the mortgage document on a sliding scale dependant on the loan amount. On a $250,000 mortgage, approx. $900, on a $500,000 mortgage – approx. $2,000

Lenders Mortgage Insurance (LMI) - is required to be paid should you have less than a 20% deposit and allows you to begin building equity in your own home sooner. LMI covers the lender in the event that you are unable to meet your mortgage repayments, and your home has to be sold giving the lender greater confidence to loan you the amount you require.

For more information about LMI, click here

Stamp Duty

Contract Stamp Duty - payable on the contract for sale of land and is calculated on a sliding scale based on the purchase price of the property. Typically, it must be paid within three months from the date of the contract or if borrowing, before settlement. Fees vary by state, however on a $250,000 property stamp duty is approx. $7,200, while on a $500,000 property it rises to $18,000. Discounts and exemptions may apply to First Home Buyers.

Deposit

In most instances a 10% deposit is required at contract exchange. On a $500,000 home this amounts to $50,000 however many borrowers may not be aware of other options available if the deposit is tied up in other assets or investments such as their existing home. In this instance, many home buyers can access a deposit bond. A deposit bond is available through most lenders and for a small upfront fee is a guarantee provided by an insurer on behalf of the borrower. This enables the buyer time between the purchase of a new home and the sale of the existing home to pay the deposit but gives the vendor the confidence that the deposit will be paid.

Conveyancing / Solicitor Fees

A solicitor or conveyancer is required to assist with the legal documentation involved in purchasing a home. They run appropriate searches on the property, will transfer the title or ownership of the property and will often coordinate any inspections required. Fees are very competitive and are typically based on the work required. Fees may also include charges for a number of disbursements including local council or rates certificates.

• Conveyancing Fees – from $400 to $1,500

• Solicitor Fees – from $600 to $2,000

Inspection Fees

• Building Inspections – inspect the structural soundness of the property, revealing any visible defects and repairs required, approx. $275 to $500

• Pest Inspections – check for indications of pest infestation (present or past) that may be of concern, approx. $150 to $300

• Body Corporate Search – Conducted for apartments or properties within a complex. Includes any ongoing maintenance or structural problems with the buildings, information about strata levies etc, approx. $165 to $250

Other Costs

• Building Insurance – The cost of the insurance depends on the location, value, size, age and type of material the building is constructed with.

• Council rates, water rates and strata levies – adjusted as if the rates are paid in full for the current year or quarter

• Electricity, Gas & Telephone – will need to be reconnected into your name if you are taking occupation of the property; if the property is to be tenanted then the tenant will need to do this. Reconnection costs are approx. $80 - $100 per facility

• Removalist costs – will vary depending on where you are moving to, how far you are moving, how much furniture is to be moved and whether you do the packing yourself. Prices range from $600 to $3,000