The prospect of buying a home is an exhilarating time in your life, but you need to know what you are up against. As an Australian homebuyer, you’re offered a plethora of property choices on the market. While you may be quick to fixate on the advertised purchase price, it is essential to factor in the hidden and extra costs in purchasing the home that you may not have thought about.
As the owner of Read Finance which is a mortgage broking company, I deal with first home buyers consistently. Recognising that there has been a common trend that first home buyers haven’t thought about additional fees they may come across, I’ve compiled a list of these that you need to keep in mind.
Home Loan Fees
Home loan fees, sometimes referred to as mortgage fees, are the costs associated with setting up, maintaining, and closing your home loan. In Australia, these fees can significantly vary depending on the type of loan, the lender, and the loan’s terms and conditions. Here are some of the common home loan fees you might encounter:
- Application Fee – This fee is charged by the lender to set up the mortgage. The amount that it could be depends on the lender’s product that you are going with, and can typically range from free to a few hundred dollars. Some places may call this a Mortgage Establishment fee.
- Property Valuation – To determine the value of the land and improvements a valuation is normally completed. Depending on the lender’s product you go for this commonly also ranges from being complimentary to a few hundred dollars.
- Transfer Duty – There are grants offered by many of the states and territories of Australia that reduce or remove this fee for a first-time home buyer. This is known as Stamp Duty outside of Queensland.
- Lenders Mortgage Insurance – Commonly referred to as LMI, this is insurance to protect the bank in case you default on your repayments. It may be a requirement by the lender, especially if you’re borrowing more than 80% of the property valuation.
- Mortgage Broker Fee – We do not charge fees for first home buyers at Read Finance unless their circumstances require a considerable amount of more work. Any fees that we charge you will be discussed and provided on a credit quote after our first discussion, this is so we get an idea of your current circumstances. Different mortgage brokers have different fees but are required to provide you with a credit quote
Property Fees
Property fees in Australia encompass a range of costs associated with buying, owning, and selling property. These can include upfront costs like conveyancing fees (for legal services related to transferring ownership) as well as building and pest inspection fees, and if applicable more fees that relate to your first home purchase.
After purchasing a property, homeowners are also responsible for ongoing costs such as council rates, water rates, strata fees (for properties like apartments or townhouses), and home and contents insurance. Additionally, any maintenance or repair costs will also be the responsibility of the homeowner.
- Inspections – Building, pest and electrical inspection fees. Depending on the lender’s policies you may be required to have some or all of these completed.
- Insurance – Building insurance may be one of the requirements of the lender. Contents insurance is also something you may want to consider.
- Legal – A solicitor or conveyancer to go over the legal documents and transfer of ownership.
- Utility Costs – One fee that I’ve found that people often forget is the cost of setting up their utilities at the new home. There may be a connection or transfer fee
- Council and Water rates – Ongoing rate fees will apply once you have purchased the property.
- Strata / Body Corporate – Buying a property on a strata title or an apartment will lead to body corporate fees. This could be substantial fees if there are any major areas of concern.
- Building Maintenance – Even if you are not making significant renovations, you should plan for regular property maintenance.
Conclusion
In conclusion, while the prospect of buying a home in Australia is exciting, it is essential to be aware of the hidden and extra costs associated with the purchase. As a prudent homebuyer, you should not solely focus on the advertised purchase price but also take into account various home loan fees and property costs. It’s crucial to consult with a mortgage broker like Read Finance to get a clear understanding of these fees and how they might impact your overall budget.
As you embark on your journey to homeownership, having a comprehensive understanding of these costs will enable you to make informed decisions and better plan your finances. Being financially prepared for all aspects of buying and owning a home will set you up for a successful and enjoyable homeownership experience in Australia.
