Deciding that you are ready to buy your first home is a very exciting time, but also a very daunting one. Four out of five first home buyers don’t feel well informed about the property purchase process - hopefully this article will help you a little.
One thing to be aware of is that saving money for a 5-20% deposit is not enough. There are a number of additional expenses which can add up to an additional 10% of the purchase price.
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Many first home buyers do not budget for these additional costs, and can find themselves in a bit of trouble. It is important that you included these fees as part of your research and planning. You may need to save for a bit longer before delving into purchasing your first home.
#1: Stamp duty
If you have purchased an existing home, or an apartment which is currently under construction you will need to factor in stamp duty. Stamp duty is a state government tax and it one of the largest expenses you will face. It varies from state to state, therefore visit your relevant Office of State Revenue website to determine the cost.
#2 Lender’s Mortgage Insurance
If your loan to valuation ratio (LVR) is over 80% you will need to pay Lender’s Mortgage Insurance (LMI), which varies from lender to lender.
#3 Mortgage registration fee
You will need to register your mortgage and pay a registration fee to the Land Titles Office which covers the cost of lodging and registering the transfer of land document. The fee differs from state to state, and is approximately $100.
#4 Loan Provider Fees
Your loan provider may charge you a number of costs including an establishment fee (this varies but can be as much as $1000), a settlement fee, service fees and maybe even a fixed rate lock fee.
#5 Inspections
It is recommended that you undertake building and pest inspections with qualified professionals before exchanging contracts.
#6 Legal Fees
Legal fees for your solicitor or conveyancer to transfer the property from one person to another, as well as performing a title search to ensure the seller is allowed to sell you the property. Make sure you ask what the costs will be.
#7 Rates after settlement
Don’t forget that once settlement takes place that you will be responsible for Council rates, utilities and owner’s corporation fees for units and apartments.
#8 Insurance
It is recommended that you take out Home & Contents Insurance and Mortgage Protection Insurance. Your lender will require that you have a Building Insurance Policy.
#9 Moving in
Don’t forget your moving fees and furnishing costs!
Expenses example for $400,000 property
- Deposit: $20,000
- Lender Mortgage Insurance (as have less than 20% deposit): $12,500
- Stamp duty: $8,185
- Transfer fee: $1,120
- Loan provider fee & legal costs: $1,000
- Mortgage registration fee: $100
- Build and pest inspections: $500
- Total of extra expenses on top of deposit = $23,405
This is a guide only, therefore you should seek financial and legal advice for accurate information.
You should also determine whether you are eligible for any government support.
First Home Owner Grants, including stamp duty benefits and buying off-the-plan benefits can be found on the relevant Office of State Revenue website.