In addition to saving a deposit or using equity in an existing home you also need to allow for a range of costs when purchasing a property.

When added up these costs can range between 4% to 7% of the purchase price.

For all our clients we provide an estimate of likely costs associated with a property purchase so you have all your bases covered.I've covered some of the typical costs below.

GOVERNMENT AND CONVEYANCING COSTS

Stamp Duty
This is the big one. All other costs are relatively small by comparison. Stamp duty rates vary between state and territory governments and also depend on the value of the property you buy. You may also have to pay stamp duty on the mortgage itself. 

If you are a are home buyer then you will have access to concessions on stamp duty. Stamp duty is waived completely for purchases up to $500,000 and concessional rates apply up to $550,000. Above this the range normal stamp duty rates apply. 

Transfer fee
Another fee chraged by the government to recrd change of ownership of the property

Mortgage registration
Government charge to register your lenders mortgage against the property

Legal/conveyancing fees
This involves the legal rigour around your property purchase to ensure you get clear title and that you are aware of any potential title issues that could affect your property. Costs will generally be around $1,000 – $1500.

Building inspection
This should be carried out by a qualified expert, before you purchase the property. It is quite commen to make your contract subject to a building inspection, so if there are any structural problems you have the option to withdraw from the purchase without any significant financial penalties. A building inspection and report will usually start at around $400 - $500. 

Pest inspection
Also to be carried out before purchase to ensure the property is free of problems, such as white ants. Allow up to $500 depending on the size of the property.

Moving costs
Don’t forget to factor in the cost of a removalist if you plan on using one. 
 

LENDER FEES

Application fees
Most lenders will charge some form of application fee or establishment fee to set up the loan. This can vary from lender to lender but is usually around the $600 mark. This is an area where you need to exercise a bit of caution. For some lenders this will be an all up fee covering loan set up, valuation, and legals, but for others it will be one of a range of other fees. So it’s worth having a close look over a lenders complete list of charges so you know the total cost you are up for.

A number of lenders will promote no application fee, but will then charge for valuations and settlement that can end up costing more than $600.

Valuation fees
Many lenders will include one valuation as part of their application fee. They may however, charge additional fees for additional properties, properties over a certain value, properties in certain locations, and properties that are unique in some way. Again some lenders will have this as an additional charge to their application fee.

Legal/document fees
Some lenders may charge a separate fee for preparation of loan documents, particularly if they are outsourcing their legal work. This can vary from a few hundred dollars to over $1,000.

Settlement fees
Most lenders will charge an additional fee to attend settlement, of around $150 - $250. If there is more than one settlement involved then you will be charged for each settlement.

Lenders mortgage insurance (LMI)
Lenders mortgage insurance apples where you are borrowing more than 80% of the propertties value. For example if you are only contributing 5% towards to the purchase price then mortgage insurance will apply.

The amount charged is based on both the amount borrowed and the Loan to Valuation Ratio (LVR), and can range between 0.5 to 3.0% or more, of the loan amount. Importantly mortgage insurance can vary greatly from lender to lender. Again you might get a great rate but a higher premium might actually see your real rate being much higher.

Service fees
Lenders may charge ongoing service fees. This could range from $8 a month up to $400-$500 a year

Offset fees
Some lenders will charge extra to set up an offset account and may also charge an ongoing fee for this facility

Switching fees
If you want to change your loan down the track like switching from variable to fixed your lender may charge a switch fee which could be $500 - $600.

Talk to me about your requirements
To get a better understanding of what costs are involved and also what various lenders are charging make a time to talk with me about your requirements. Click here to book in an initial telephone chat.

Greg Carroll
More Than Accountants
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