The extra costs of buying a home
When most people think about buying a home they usually first think about a loan to cover the purchase price and then the amount of money they’ll need for a deposit.
There are plenty of other extras, often forgotten about, that also need to be considered when buying. And of course these also need to be factored in when putting your savings together. Otherwise you could find yourself caught short and not be able to afford the home you’ve got your heart set on. Here’s a rundown on some of those extra costs to keep in mind.
Often overlooked by buyers, building and pest inspection reports are very important. A building inspection details the list of any structural defects and repairs required, while a pest inspection checks for any signs of past or present damage due to pest infection.
Before purchasing, you may be required to get a formal valuation of the property. Licenced 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.
Loan establishment fee
At RACQ Bank a fee is charged to establish a home loan. An establishment fee is charged to cover costs involved in processing the application and fulfilling the loan through to funding. This includes credit checks, property appraisals and administrative costs.
Make sure you research each banks’ fees before submitting an application.
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.
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 take into account the real estate agent’s fee, which is usually a commission based on a percentage of the value of the property being sold.
If you need to borrow more than 80% of the cost of your home, you’ll need to factor in Lenders Mortgage Insurance (LMI). And don’t forget about mortgage protection insurance, which will cover you if you find yourself suddenly unable to work. Then of course there’s 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 – ie. lenders generally require that you maintain insurance on the property.
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.
So 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.
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