Loan Basics #9:
Q: What are the extra costs of buying a home?
A: Application & establishment fees, stamp duty + more.
When they take out a Mortgage, many people forget to consider the associated fees and expenses. Here are some of the extra costs that you'll need to consider when you take out a Home Loan.
Home Loan application fees
Most Lenders charge a Home Loan application fee. This can range from loan to loan, and covers:
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- Legal contracts
- Property title checks
- Credit checks
Mortgage fees and costs
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- Mortgage establishment fees
Lenders generally charge a Mortgage establishment fee - a fee for setting up a Mortgage.
- Property valuation
A third party often chosen by the Lender, needs to determine the value of your land and improvements.>
- Mortgage registration
Your Mortgage deed needs to be registered with the government.
- Mortgage stamp duty
The government charges stamp duty to register your Mortgage.
- Lenders Mortgage Insurance
If you don't have 20% of the purchase price of the property, the Lender will require you take out Lenders Mortgage Insurance to cover the risk that you might default on your repayments.
Property fees and costs
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- Building inspection fees
It's wise to have your property inspected for any structural problems or pests (e.g. termites).
- Stamp duty
Governments charge stamp duty to transfer the ownership of a property.
- Registration of transfer fee
The new owner of the property needs to be registered at the Land Titles Office.
- Legal fees
You generally need to pay a solicitor to handle the transfer of ownership of the property on your behalf.
- Home & Contents insurance
Most homeowners insure their home and contents against a range of threats: burglary, fire, storm, etc. You need to insure the home while you have a Mortgage.
- Life or income protection insurance
Borrowers should consider protecting the primary income earner while they have a Mortgage.
- Utility costs
Connecting electricity, gas and telephone can be costly and generally involves the lodgement of security deposits.
- Council rates
Your local council charges rates to cover garbage collection and a host of other services.
- Body corporate fees
If you buy an apartment, body corporate fees are charged, and some fees can be significant - particularly if the building is in need of a major work (e.g. concrete cancer, security upgrade, new hot water system, etc)
- Maintenance costs
Don't forget to make provision for regular maintenance on your home - even if you decide not to undertake significant renovation.
Want another Mortgage & Home Loan tip?
Low Doc Home Loans: Mortgages for the Self-employed. Check out Loan Basics #10
