You’ve worked hard, saved a deposit and now you’re ready to start looking for your next or first home. Beyond the purchase price, have you considered how much cash you’ll really need?
Additional costs involved in buying a home can be up to 10% of the purchase price, so it’s important to do a budget before diving into the property market.
1. Stamp Duty, Fees & Taxes
Unfortunately, these are things we can’t escape. Everyone must pay stamp duty on the purchase price of their property. This is charged by the state or territory government, so the amounts will vary depending on where you live, but it will probably be one of the biggest dents in your cash reserve.
There are sometimes concessions for first-time buyers and varying rates for those buying land – it’s best to check with the Office of State Revenue for the particular state you’re buying in.
As well as stamp duty, a registration fee will be payable. This covers the cost of lodging and registering the transfer of land document with the state titles office. These fees also vary between state.
2. Home Loan Costs
* Fees
Some lenders charge a variety of fees for arranging a home loan, such as an establishment fee, a settlement fee, service fees and maybe a fixed rate lock fee. When applying for your home loan, you should be aware of what purpose each fee serves and how much they cost, because the definition of each fee/cost can vary from lender to lender. Getting final approval on the loan may also require other costs such as paying for the valuation.
* Loan Mortgage Insurance
If borrowing more than 80% of the purchase price, it is likely you will need Lender’s Mortgage Insurance (LMI), which can be costly. The cost of LMI is calculated based on two main risk variables: the loan amount (the higher the loan amount the higher the risk for the insurer) and the loan to value ratio (the higher the loan to value ratio the higher the risk for the insurer). Rates can vary from 0.50% (low risk) to around 4.45% (high risk). The difference in interest rates and fees between lenders can be small but the difference in LMI can be significant. Make sure you get a few quotes before deciding on your loan provider.
3. General purchase costs
There are also a few other costs that go along with buying a new home, including (but not limited to):
* Legal Fees
Your solicitor or conveyancer will review the contract of sale, request changes if need be and organise the transfer of the property as well as making sure your finance provider is ready to go on settlement day. Ask your solicitor or conveyancer for an estimate of fees. These fees vary as well, and can also depend on different scenarios.
* Title search
This is performed by your legal representative. Title searches ensure that the seller has the legal right to sell the property, and that there are no other encumbrances (such as liens, mortgages etc.) or property line issues that could prevent the buyer from taking full possession.
* Utilities, strata fees and council fees
These will be paid as part of the settlement costs and will be on a pro-rata basis
* Inspection reports
Depending on the type of home you’re purchasing, the reports will be a written commentary on inspections carried out by a building inspector, pest inspector or strata search company.
* Research and property advice
If you don’t buy property regularly, it is a clever idea to get an expert on your side who will make sure you buy the right property at the right price. Buyer’s agent fees vary depending on circumstances. The team at Future Habitat will be happy to answer any questions you have about buyers agents and the services offered.
* Insurance
You will probably be obligated to have home and contacts insurance as part of your mortgage. Shop around or use one of the sites that compare policies.
4. Costs to get your Home Set Up
You’re almost there, and all you have to do now is move into your new home. You should think about the following:
* Removalists
Get a few quotes and remember, cheapest isn’t always the best option. Aim to use a removalist who friends and family have used and can vouch for.
* Connection of utilities, including cable, etc
* Handyman:
There is always something that you want to do in your new home to put your stamp on it. This could include hanging artwork, changing window furnishings, adding storage, taking down unnecessary fixtures, painting, etc. It’s a good time to have these jobs done while the house is empty.
* Furniture
It’s nice to have new furniture for a new home. Be sure to pay for everything else first. It’s also good to get a feel for the home and how you use it before committing to the layout of a room and pieces of furniture.
5. Ongoing Costs
Running a well-maintained home needs some budgeting and planning. Consider the following:
* Maintenance
Keeping a well-maintained home will pay off in the long run. Set aside a budget for regular upkeep of the home, such as cleaning gutters, pressure washing footpaths, washing the house, gardening, etc.
* Insurance
This will be ongoing cost, and should be kept up to date at all times.
* Council Rates and utilities:
You can’t really avoid these.
* Mortgage payments
Try to pay off more than is owing each month. This can shave years off your mortgage.
* Pest treatments
Having a pest free home is nice, but it’s also important to keep pests away that will be detrimental to the structure of the home – yes, we are referring to termites
* Buffer
Always keep a buffer handy for unforeseen events. Having personally experienced a burst sewer pipe, there are some things that just can’t be put off, even if they’re costly!