There’s probably a good reason that you’re 30 and still living with your parents but let’s face it, it kind of sucks when all of your friends have moved out and are getting on with their lives.
Isn’t it time you moved into a home of your own? Leaving the nest is a big step so it helps to have some idea of the costs involved.
Do you have a deposit?
So you’ve made the big decision to buy and found a piece of prime real estate to get you started: what comes next?
Well, the first thing you’ll need is a deposit.
Lenders generally require you to provide a 5% deposit plus another 5% to cover the costs of completing the purchase including stamp duty, LMI, conveyancing fees and mortgage establishment fees (the cost of these fees will vary from lender to lender).
In effect, you need closer to 10% of the property value in order to buy the property.
For example, you’d need around $30,000 to $60,000 as a minimum in order to complete the purchase of a property worth $600,000.
One of the only exceptions to the deposit requirement is if you have a guarantor (usually your parents) that can use their property as security for your mortgage.
Once you have the minimum deposit or guarantor, you can get started on the loan application process.
What other home loan costs are there?
Apart from the above government fees, you’ll also have to cover:
- Conveyancing fees: You’ll need the services of a conveyancer or solicitor to handle the transfer of the property into your name. This will cost approximately $800 to $1,500.
- Inspections: You may need a building and/or pest inspection, as well as a strata report if you’re purchasing an apartment. These reports can cost up to $600 in total so it’s important to discuss these reports with your conveyancer and mortgage broker to see if they’re actually required.
- Loan fees: Some lenders charge an application fee, settlement fee or valuation fee. These fees can vary anywhere between $0 to $900.
- Home building insurance: Building insurance is a compulsory cost that needs to be paid prior to settlement. The cost of insurance will vary depending on the state and location of the property. Please speak to your mortgage broker to get a better idea of this cost.
- LMI: If you’re borrowing over 80% of the property value then you’ll be required to pay a mortgage insurance premium.
For example, you’ll have to cover the cost of LMI if you’re borrowing $450,000 for a $500,000 property. If you were to borrow just $50,000 less ($400,000), you can avoid this cost.
If you can’t come up with a larger deposit, one way around the LMI requirement is with a guarantor.
There are government fees too.
There are a number of fees charged by your state government when purchasing a property because if there’s nothing the government loves more than confusing forms and unhelpful customer service, it’s bureaucratic fees that no one really understands.
At any rate, some of these fees include:
- Stamp duty: As one of the largest expenses, it is a tax levied by your state government on all property purchases (the cost will vary depending on your state). Luckily, there are stamp duty waivers available for eligible applicants.
- Mortgage stamp duty: This is a tax levied by the state government based on the size of your mortgage. It has now been abolished in most states.
- Transfer fee: This is a government fee charged when registering your name on the property title and removing the vendor’s (owner’s) name.
- Registration fees: This is a government fee charged when registering your lender’s mortgage on the title of the property you purchased. If the vendor has a mortgage on the property then you may be charged to remove their mortgage, the cost of which will be reimbursed by the vendor at settlement.
If you’re a first home buyer, buying a new property or building a home then you may be eligible for a stamp duty waiver as well as other concessions and grants.
Get in touch with one of our brokers by completing our free assessment form to discover what grants you may be eligible for.
Apart from the initial costs you’ll need to cover in order to get your home loan approved, a qualified mortgage broker will actually assess your ability to make mortgage repayments.
They can also help you compare the cost of renting to the cost of owning a home if you’re still up in the air and tell you whether you’re eligible for a discount or waiver on any of the above costs.
Call 1300 889 743 or fill in our free assessment form to speak with one of our experienced team members today.