7 Hidden Property Costs You Need to Know About
There are many expenses associated with buying a home. Keep these costs in mind when factoring in the price of the property.
When buying a new home or investment, it's not surprising you would be most focused on the property price tag. But there are many different costs associated with purchasing a property, ranging from stamp duty to mortgage insurance and legal fees. Here we round up all the hidden costs, so you're not caught by surprise later on.
Planning on purchasing an apartment or townhouse? If buying in a strata complex it is important you do your homework and obtain a strata report beforehand. This will expose whether there are any looming issues – big and small – or required maintenance with the building. It will also show if the building is well-maintained and financially healthy. Today it is common for strata reports to have already been arranged by the vendor for your convenience and are available to purchase through the real estate agent. They can cost anywhere from $30 to a few hundred dollars.
Loan Application Fees & Mortgage Registration
Depending on your lender, you may be required to pay a loan application fee – usually a few hundred dollars. There are also ongoing service fees charged by the lender monthly or yearly on your home loan. Fees can vary greatly so be sure to keep this mind when choosing your lender. There are some costs involved with formally registering your mortgage. The mortgage registration fee is charged by state and territory governments to register the physical property as the security for a home loan. While this tends to be a minor cost (roughly no more than $200), it is still worth factoring into your overall expenses.
Conveyancing & Legal Fees
A solicitor or conveyance is a key player in your property search. They will manage everything from reading the contract pre-purchase to the settlement if you’re the successful buyer. Make sure to choose someone reputable and reliable and ask about their service costs and disbursements upfront. Average conveyancing fees can range from $500 to more than $2,000.
Council, Strata & Utility Rates
Utility rates usually run quarterly and, upon settlement, will be paid by the vendor until the end of the current quarter. You will only be responsible for paying rates and charges once the property purchase has been finalised. Remember, when budgeting for your property keep in mind the ongoing council and utility rates and any other expenses such as strata fees.
If you have not saved 20 per cent of the property’s purchase price, you may need to pay Lenders Mortgage Insurance (LMI). This protects the lender in the situation that you are unable to meet mortgage repayments. It is payable by you as a one-off sum or added to your home loan.
Of all the extra costs that come with purchasing a property, stamp duty (otherwise known as land transfer duty) is by far the greatest. Stamp duty is a general tax imposed on the purchase of real estate in Australia. It's charged by the state and territory governments and is calculated as a percentage of the market value of the property; however, it varies from state to state. Stamp duty can cost tens of thousands of dollars - but there are stamp duty exemptions and concessions available to first home buyers up to a certain value. Along with stamp duty, there is a transfer registration fee to legally transfer the property into your name. The state government charges a fee for managing the registration, which ranges from a flat rate of $146.40 in NSW upwards to a few thousand dollars in other states.
It is wise to arrange a building and pest inspection before purchasing a property. This can cost anywhere from $500 - $1000, depending on the company and location. Remember that while this may seem like a lot of money to pay upfront, it could significantly save you in the long run, particularly if a property has server structural faults or insect infestations.
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