So, you are ready to purchase your first home. You’ve got pre-approval for your mortgage, and you feel confident your income will stretch to cover the repayments. But are you aware of all the other costs involved in buying a home?
Here, we break down the fees for you, so you don’t encounter any surprises along the way.
To purchase a home, you will need a deposit. To avoid Lenders Mortgage Insurance (LMI), you will need a 20 per cent deposit. Some lenders will reduce the required deposit to as little as 5 per cent, depending on your income and other assets. If you haven’t been able to save the full 20 per cent required for the deposit, talk with your broker about other options such as using a guarantor.
Stamp duty is in addition to the value of your property, and is one of the largest payments associated with buying your own home. Stamp duty is the tax paid to your state or territory governmentand is calculated as a percentage of the property price. from state to state, and some governments offer incentives to first home buyers. Check out the current government .
Make sure you’ve factored stamp duty into your costs.
Legal and conveyancer fees
When you purchase a home, you need to hire a lawyer or conveyancer to ensure all the legal requirements are met, and the transaction is legally sound. Fees vary, but are around 1 to 2 per cent of the property value. Make sure the lawyer you engage is a fully accredited conveyancer. Check they are a member of the Australian Institute of Conveyancers.
Lenders Mortgage Insurance
If you have borrowed more than 80 per cent of the value of your property, you may be up for (LMI). LMI provides the lender with security, if you are not able to pay back your loan. The good thing about LMI is that it may make your dream property more accessible, because you don’t need to save the full 20 per cent deposit. LMI is based on your loan-to-value ratio (LVR), which is calculated by dividing the cost of your home loan with the value of the property.
Building and pest inspection
Engage a qualified inspector to assess whether the property is structurally sound and free of pests such as termites. Purchasing a property without an inspection is risky, as you may be up for big expenses such as repairing the roof or fixing downpipes. You may also be putting yourself at risk if you have not checked out things like the wiring.
The cost of an inspection varies. Talk to your Smartline Adviser for recommendations.
Potential lender fees
The lender may charge an application fee for processing your application. They may also charge a valuation fee, to have your property valued. Some lenders will charge set-up and administrative fees for your mortgage. Talk with your Smartline Adviser about how fees vary between lenders.