There is a raft of costs associated with buying property on top of the purchase price – and preparing for these costs can make for much smoother sailing
Forgetting the extra expenses that go hand-in-hand with buying property is a common mistake made by many property buyers.
From legal costs to removalists, the supplementary fees and charges associated with property buying can end up adding thousands of dollars to the purchase price, sometimes as much as five to 10 per cent.
By having the foresight to factor in these additional costs you can avoid placing added pressure on yourself as well as your budget. Here are the key extra costs you should consider:
• Stamp duty
Stamp duty will most likely be the biggest financial outlay home buyers will encounter, but just how big is solely dependent on the purchase price of the property.
Before you start to calculate possible liability, check whether you receive any stamp duty exemptions or concessions. Some first home buyers are able to take advantage of stamp duty breaks if they are purchasing below a predetermined threshold. These concessions vary from state to state, so be sure to do your homework to find out exactly what you may be eligible for.
• Lenders mortgage insurance
If you intend on borrowing more than 80 per cent of your property’s purchase price, you’ll most likely have to pay lender’s mortgage insurance (LMI). This fee doesn’t protect you as a borrower but rather the lender in the event you default on your loan.
LMI is a one-off premium, paid upfront or capitalised into your loan. The premium you pay will be based on the purchase price of the property, the size of your deposit and the style of loan you select.
Legally transferring a property into your possession comes at a cost. This is the fee associated with contracts and other legalities. Costs will fluctuate, but expect to pay several hundred at least, depending on the service you use and the depth of advice offered.
• Mortgage establishment fees
Many home buyers are caught off guard when hit with mortgage establishment fees. Changes will differ from lender to lender as well as the type of loan. These fees are typically flexible and you may find that there is some level of negotiation with lenders.
• Other fees
It is crucial that fees like registration – which involve registering your property – are taken into budgeting consideration as well as costs like pest inspections, building insurance and removalists. You may also find you are slapped with fees which are solely contingent on the type of property you are purchasing – such as strata costs.