If you’re a home buyer, you probably think your main cost is the price of a home. But did you know there are hidden expenses related to buying a property? Here are six common costs to factor into your budget.
1. Conveyancing and solicitor fees
A conveyancer or solicitor takes care of the legal paperwork involved in buying a home, such as reviewing a contract, carrying out land searches and lodging documents. Their fees can range from $500 to $2000.
2. Stamp duty
Stamp duty is a tax charged by state and territory governments on a property transaction. The cost depends on factors such as location, price and if you’re buying as an investor or owner-occupier. First home buyers can receive a stamp duty concession depending on the state and territory they buy in.
3. Pest and building inspections
Pest and building inspections are optional but recommended for peace of mind that a property has no underlying issues. A combined pest and building inspection can range from $300 for a small home to $1000 for a large home in metropolitan areas.
4. Loan application or establishment fees
Lenders charge a one-off fee for setting up a home loan. Application fees vary according to lenders, your mortgage product and loan amount. Some lenders may waive the fee under special circumstances such as a promotion.
5. Lenders Mortgage Insurance
If you’re borrowing more than 20% of a purchase price, a lender will charge you Lenders Mortgage Insurance (LMI). LMI protects the lender from financial loss if a borrower can’t meet their home loan repayments. The amount depends on factors such as your deposit, your home loan amount and whether the property is an investment or owner-occupied. You can avoid paying LMI by saving a bigger deposit.
6. Property valuations
While you may agree to a purchase price with a seller, a lender will still carry out a valuation of a property before giving you unconditional approval. They will use this valuation to assess if they’ll lend to you. A valuation can cost between $300 and $600, but some lenders may not charge for it.
If you need help understanding the various costs involved in buying a home, reach out to us today.