There are a number of expenses associated with buying a house some up-front costs you expect, and some you probably haven’t considered.
Home loan costs
When you buy a house you have to pay money to a number of different people. One of the most obvious is your home loan provider – both mortgage repayments and lender fees. Most lenders’ application fees include one standard valuation and standard lenders’ legals.
A number of government fees will apply, including land transfer registration fees and government taxes. These fees are a combination of flat fees and variable charges that vary with the price of the property.
In Australia stamp duty rates vary from state to state and these can add a significant cost to the property you are buying. First home owners may be eligible for a reduced rate of stamp
duty in some states.
Lenders Mortgage Insurance
Mortgage insurance is another fee to take into account, and the price of this varies from institution to institution, depending on the value and type of loan you have selected. In most cases, this premium can be added to your loan amount.
Legal fees vary by state and by the legal professional you choose. You should be aware of the legal fees you will be required to pay before you buy a house.
There are two main forms of inspections that are recommended. The costs of these inspections vary depending on the company you use:
1. Building inspection - checks for structural problems
2. Pest inspection - ensures the house is free of pests and termites
The costs you might not have considered
There are also other fees, such as utility connection or transfer fees, which are paid to connect the water, electricity and gas. While occasionally these may be paid for, generally you will be expected to meet these costs.
When buying a house it’s important to construct a detailed budget that takes into account all the costs you could accrue, revise it… and revise it again, to make sure you aren’t surprised by any unexpected costs.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance (LMI) insures your lender against nonpayment or default on your residential property loan. It does not protect you, only your lender. Banks are willing to accept smaller deposits making it easier for first homebuyers to purchase a home and therefore get into the property market.
How it works
You pay a once off fee to the lender, which you can choose to pay upfront or add onto your loan amount. Fees vary according to your loan amount and size of your deposit. While LMI is not mandatory, most lenders require it if you borrow more than 80% of the property’s value.