Costs of buying a property
In Australia there are a number of additional costs in buying a property apart from the purchase price. Be sure you are aware of upcoming fees so that your dream home does not become a financial nightmare. Costs to factor in include:
This is a State tax that’s usually charged on a sliding scale. The higher the purchase price of the property, the more stamp duty you’ll pay. For example in NSW the stamp duty on a $500,000 property is just over $18,000. There are calculators online that allow you to check the likely stamp duty in your area.
This tax is payable on the mortgage document. It doesn’t apply in all states but as an example in NSW if you have a home loan of $400,000 you will pay a one off tax of just over $1,500.
Home loan fees
Different banks charge different fees for establishing a loan and valuing the property. You should ask the bank you are dealing with.
Lenders Mortgage Insurance (LMI)
If you’re borrowing more than 80 per cent of the value of the property, your financial institution may require you to take out Lenders Mortgage Insurance. This is to protect the institution (not you) should you be unable to meet your repayments and the property is sold for less than the amount you owe. This cost varies depending on the risk involved.
The premium is usually a one-off payment, calculated on a sliding scale. The greater the percentage of the property value you borrow and the more money you borrow, the higher the premium will be. In some cases it’ll be a few hundred dollars,
in others it may be several thousand dollars. You can get an estimate from your financial institution.
Building and pest inspections
Costs vary for these inspections but it’s important to determine whether the property is unsafe or has a pest problem such as termites. Make sure the people you use are licensed, provide a written report and have professional indemnity insurance.
The survey report shows where the building is located on the land in relation to the boundaries. It’s sometimes included in the contract of sale, or you may need to pay for a professional surveyor to produce this report. The report’s important as it allows you to see if everything is as it should be. Imagine buying a new home only to find out it’s partly built outside the boundaries and needs to be pulled down.
If you’re buying a strata title unit or townhouse, this report will give you access to the records of the committee that oversees the administration of the property and allow you to see if there is enough money in reserve to carry out maintenance and will provide details of your on-going strata fees.
This the legal transfer of ownership of a property from one person to another. Depending on where you are (as the laws vary from state to state) you have three choices: a solicitor, a specialist conveyancer or you can do-it-yourself. If you do employ a professional, the fee will vary. Some offer flat-fee conveyancing but make sure you know exactly what this includes. The more complex and drawn out the negotiations are, the more your conveyancing is likely to cost.