Sarah: We all know purchasing a house is an expensive process.
But did you know that there are many upfront costs that you'll have to pay on top of your
deposit?
How much does it really cost to buy a house these days?
Hi guys, it's Sarah from Lendi, Australia's number one online home loan platform, where
we've already helped thousands of Australians purchase a property and in the process help
them understand the costs that might be involved.
Sarah: Watch this video to make sure you're not caught off guard with hidden fees.
And let's go through all of the upfront costs to look out for when you're purchasing a property.
Sarah: Now, before we start, if you want great home loan tips in Australia, please subscribe
to our channel.
And don't forget to hit the bell to be notified when we upload new videos.
Sarah: Number one, the property itself.
Let's start with the big one.
Your largest and most notable expense will be your property deposit.
Of course, this cost will depend on a number of factors such as location, size, and space
of the property.
When negotiating the purchase price, remember that some additional costs like LMI and stamp
duty are calculated off a percentage of the purchase price.
So not only would you be saving on the actual property costs, you'll be helping to reduce
additional costs later down the track.
Sarah: Most buyers aim to have a 20% deposit, which will help save them additional costs
like lenders mortgage insurance.
However, it's hard to have that kind of savings, especially in Australia's capital cities.
So there are other options available if you don't have a 20% deposit.
Depending on your situation and the specific lenders, some lenders will provide a loan
for borrowers that have a 5% deposit.
Keep in mind, however, you're likely to pay lenders mortgage insurance, LMI, which we'll
talk about next.
Sarah: Number two, lenders mortgage insurance.
Lenders mortgage insurance, or LMI for short, is a flat fee which is paid to your lender
if you have a deposit under 20%.
LMI exists as a protection for lenders should you, the borrower, be unable to pay off your
loan.
It's an extra cost that can be avoided by regularly saving and paying at least a 20%
deposit.
If you want to check out whether you need to pay LMI, you can use the link which will
take you to our free calculator tool.
The payment is usually one to three percent of the property value and does not go towards
paying off your home loan.
It generally comes out in your monthly repayments.
For more information on LMI, you can check out our video here.
Sarah: Number three, stamp duty.
Stamp duty is a one-off government tax that you'll be required to pay if you purchase
land or a property.
The tax is enforced by the state and territory government, so it varies depending on where
the transaction occurs.
For more information on the different rules and rates for each state and territory, check
out the link.
There are some exemptions or concessions depending on which state you live in.
For example, if you're in new South Wales or Queensland and you're a first home buyer,
you could be exempt from paying stamp duty.
Stamp duty is perhaps the largest additional cost when it comes to purchasing a property,
so make sure you keep this in mind when you're researching.
Sarah: Number four, legal fees.
The transfer of property contracts can involve complex legal requirements, so it's worth
hiring a conveyancer or a solicitor to act as your legal representative to make sure
all your documents are up to scratch.
Conveyancers are generally more affordable than solicitors as their expertise is specifically
to the conveyancing process.
The New South Wales housing guide states that generally conveyancers will charge between
$800 and $2500.
In most cases, conveyancers will be able to get the job done and they charge a flat fee,
whereas solicitors usually charge an hourly rate.
Sarah: Number five, home loan application and establishment fees.
When applying for a home loan, a lender may charge you an establishment fee which can
vary between lender to lender.
Generally, it's somewhere between $0 and $1,000.
Additionally, there may be some extra costs for establishing a home loan with a lender.
These might be a valuation fee, a legal fee, or a survey report.
Make sure you consider all fees when you're looking into home loans.
Additionally, if you think you might refinance in the next couple of years, it might be worth
looking at that lender's exit fees.
If the exit fees are high, it can make it difficult to get out of the loan and it could
force you to stay in a loan that doesn't suit your needs in the future.
Sarah: Number six, property inspections.
Before purchasing a property, your conveyancer or your lender will usually require a property
to be inspected to ensure that it's in good condition and structurally sound.
The usual inspections include building inspections.
These look at the structure of the house as well as any visible defects that might need
to be repaired.
They usually cost between $300 and $700.
Sarah: Pest inspections.
This is to ensure there are no pests inside the property such as termites and there aren't
any previous pest infestations.
These usually cost between $200 and $350.
Strata inspection.
This report examines the written records of the owner's corporation.
It provides relevant information about strata levies and insurances and generally costs
between $200 and $350.
Sarah: Number seven, home and contents insurance.
Prior to your home loan settling, many lenders will require a certificate of currency, which
is proof of home and contents insurance that protects your property for loss or damage.
What if an electrical fire destroys the house the day that you're supposed to move in, leaving
you with nothing but home loan debt?
Your home and contents insurance will protect you on the unlikely circumstance that this
might happen.
Generally, that'll cost anywhere from a few $100 to $1,000 annually for this protection.
Sarah: Number eight, moving fees.
Finally, if you're planning on moving into a new house, there are multiple fees that
you'll need to take into account.
These include removalists.
Depending on how far you're moving and how much furniture you have, removalists can cost
upwards of $150 per hour.
Connecting internet or broadband.
Connection usually costs about $99 unless you're in a newly established area, which
will generally cost about $140 for a professional.
Utilities like electricity and gas connections.
Some providers will charge approximately $180 to $200 security deposit for new customers.
Sarah: So there you have it.
A better idea of what it will actually cost to purchase a home these days.
If you're thinking of, or you've already started the process of purchasing a new home, and
you need a little bit of help, jump onto Lendi.com.au.
Now, if you're looking for more tips, you can also join our Home Loan Hacks Australia
Facebook group where we answer anything, all things home loans.
And if you found this video helpful, please give us a thumbs up.
And if you have any questions, leave them in the comments section below.
Finally, if you want any more information on other relevant home loan topics, you can
check out our videos here.
See you next time.