What are all the costs of a home loan?

Any general questions you might have in regards to loans and finance.
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adamsj
Posts: 50
Joined: Wed Apr 07, 2010 12:18 pm

What are all the costs of a home loan?

Post by adamsj »

Hi home loan experts,

I am thinking of buying my first house. I am a mechanic and my yearly income is $49,000. I have a little more than $50,000 for the deposit on my house. I heard that there are several costs associated with a home loan in addition to the deposit and interest repayments. I was thinking of buying a property worth about $500,000 but I am not so sure now.

Before deciding on the price range of my purchase, I want to make sure I have got all the bases covered. Could anyone tell me about the costs that I have to bear while buying a home?

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Otto Dargan
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Re: What are all the costs of a home loan?

Post by Otto Dargan »

Hi and welcome to the forums adamsj,

There are indeed several costs associated with a mortgage. You can use the Property Purchase Costs Calculator to get an estimate of the costs that you will have to pay for your purchase. The calculator provides you an estimate of the following fees that you may have to pay for the purchase:
  • Purchase stamp duty: The state government levies this tax on all property purchases. This is the largest expense charged by the government when you buy a property.
  • Mortgage stamp duty: This is another tax levied by your state government and depends on the size of the mortgage. It has been abolished by most state governments.
  • Transfer fee: This is a fee for replacing the vendor’s name by yours on the title of the property.
  • Registration fees: This fee is for registering your lender’s mortgage on the title of the property.
Since you are buying your first home, you may be eligible for First Home Owners Grant (FHOG). This may help to reduce the fees charged by the government significantly. However, you may need to pay for other non-government costs such as:
  • Conveyancing fees
  • Inspections and reports
  • Loan fees
  • Renovation costs
  • Council rate adjustments
If you are borrowing more than 80% of the property value then you may have to pay LMI. This is the insurance that protects the lender in case of a default on a loan. It is usually around 3% of the purchase price, and can vary greatly with the loan amount and the loan to value ratio (LVR).

In general, borrowers spend a little less than 8% of the property price for these charges associated with buying home. Your loan application may be declined if you are unable to prove to the lender that you have enough funds to cover all these costs, as well as the deposit on your loan.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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adamsj
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Joined: Wed Apr 07, 2010 12:18 pm

Re: What are all the costs of a home loan?

Post by adamsj »

Hi Otto, thanks for the detailed answer to my question. I do not really know what LVR is. Do banks use the purchase price to calculate it?

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: What are all the costs of a home loan?

Post by Otto Dargan »

Hi adamsj,

Loan to value ratio (LVR) is an important consideration for lenders while giving out a home loan. It is the ratio of the loan amount to the value of the property you are buying and is expressed in percentage.

Lenders use LVR as one of the indicators of the risk related to the loan. A higher LVR means a higher risk to the lender. Lenders generally require a property valuation to calculate your LVR and use the lower amount between that and the actual purchase price.

If you would like to know more about these then you can check out our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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adamsj
Posts: 50
Joined: Wed Apr 07, 2010 12:18 pm

Re: What are all the costs of a home loan?

Post by adamsj »

Thanks for the explanation, Otto. I will contact you guys when I decide on the property that I want to buy. Have a good day!

alexjong
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Joined: Wed Jun 17, 2009 5:21 pm

Re: What are all the costs of a home loan?

Post by alexjong »

Hi there!

I am buying my first house so I think I may be eligible for FHOG. Can someone tell me if there are some criteria in order for me to receive the grant?

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: What are all the costs of a home loan?

Post by Otto Dargan »

Hi alexjong,

The following are some of the criteria that need to be met in order to receive FHOG:
  • Each applicant is a person at least 18 years of age.
  • At least one of the applicants is an Australian citizen or a permanent resident.
  • All applicants and their spouse/ de facto partners have not owned a residential property in Australia before July 1, 2000.
  • All applicants should not have occupied any residential property that they owned on or after July 1, 2000 for a continuous period of six months
  • The property value does not exceed the cap amount set by the state.
  • Each applicant has signed a contract for the purchase or laid the foundations for construction on or after July 1, 2000.
  • No applicant or their spouse/de facto has received a first home owner grant that has not been repaid.
  • At least one applicant will use the property as their primary residence for a continuous period of six months within 12 months of settlement or construction of the house.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

alexjong
Posts: 60
Joined: Wed Jun 17, 2009 5:21 pm

Re: What are all the costs of a home loan?

Post by alexjong »

Thank you for pointing that out to me, Otto. Cheers!

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