The extra costs of buying a home
Be mindful that there are a range of upfront costs when buying a home.
When people think about buying a home, they usually first consider a loan to cover the purchase price and then the amount of money they’ll need for a deposit. But the upfront costs don’t stop there.
There are plenty of extras that also need to be considered when buying and factored in when putting your purchase plan together. Otherwise you could find yourself caught short and not able to afford the home you’ve got your heart set on. Here’s a rundown on some of those extra costs.
Lenders Mortgage insurance
If you need to borrow more than 80% of the cost of your home, you’ll need to factor in Lender's Mortgage Insurance (LMI). And don’t forget about mortgage protection insurance, which will cover you if you find yourself suddenly unable to work. Buying a home can be a complicated process, especially if you are a buying for the first time.
Make sure when it comes time to purchasing your home to shop around for the best home loan available.
Home and contents insurance
It’s essential to consider contents insurance, which protects the fixtures and contents of your property, and also home insurance, which provides comprehensive cover for the building itself. Home insurance is usually a requirement of your loan contract – i.e. lenders generally require that you maintain insurance on the property.
If you’re not sure how much home and contents insurance you’ll need, use an online calculator.
Often overlooked by buyers, building and pest inspection reports are very important. A building inspection details a list of any structural defects and repairs required, while a pest inspection checks for any signs of past or present damage due to such pests as termites.
Before purchasing, you may be required to get a formal valuation of the property. Licensed valuers who base their assessments on hard evidence to assess the security value of the property will carry this out. A free valuation of the property is sometimes included in the home loan establishment fee by your home loan provider.
This is the tax levied on the purchase of a new property and is likely to be the single biggest additional cost you’ll need to pay. The Queensland Government offer concessions on stamp duty if you are a first home buyer and the home is valued under $550,000.
This is a state government fee for registering the loan and allows future buyers to search and see if there are any claims on it.
A solicitor or conveyancer is usually engaged by both the buyer and the seller to manage the process of transferring the property and ensuring contract obligations are fulfilled. Solicitors will also perform other searches and checks as well as providing advice to sellers and buyers throughout the process – these services may also result in additional charges. If you are selling a property as well as buying, you should also consider the real estate agent’s fee, which is usually a commission based on a percentage of the value of the property being sold.
Settling in costs
Once you’ve bought your new home, there are still more costs that may need to be considered, such as new furniture, new flooring or plumbing, removalist and packaging, end of lease clean from a rental, and electricity, phone and internet connections.
As you can see from the list above, the costs of buying a home don’t end with the purchase price and the deposit. Not that this should put you off from buying of course, but it’s always good to know what you’re in for, so you can plan and save the right amount of money.
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs. You should obtain and consider the Product Disclosure Statement or terms and conditions relating to the products mentioned, before deciding whether to acquire any products.