If you are new to purchasing property there isn’t any fine print telling you what additional costs there are. Instead you are expected to know what additional costs you will have to bear once you put your signature on the dotted line.
Here is a short outline of the hidden costs that you have to be aware of to avoid any heartache or financial strain.
The first and the biggest one is usually the stamp duty. Stamp duty is a tax that is payable to state or territory governments when buying a home, land or investment property. It's usually around 5% of the purchase price. Stamp duty does vary on the purchase price and state that you reside but usually it is the most significant expense you will have when you're buying a property and is one that is easily overlooked. Don’t forget to factor stamp duty into your budget.
Another big expense is the conveyancing or legal costs. Most conveyancers and lawyers will charge around $1,000 to $2,000 dollars to help with the conveyancing and transfer of title over into your name.
If you are looking at an older house or just want peace of mind, another expense that you might incur is through obtaining a building and pest inspection. A building inspection costs around $400 dollars and a building and pest inspection can cost around $600 all up.
Depending on the type of loan you get and whether you have any facilities such as a linked offset account, cards, redraw facilities, there are also some other loan and mortgage costs that can add to your overall expense. Your mortgage broker will be able to run you through all of the costs associated with the bank and loan that you have chosen.
So, they're the main expenses that will most of the time be unavoidable when purchasing a property. Here are some that you may encounter depending on your individual situation.
If you are a little short on your deposit you may want to borrow more than 80% of the purchase price from the bank. If you are borrowing more than 80%, the bank will require you to pay lenders mortgage insurance (LMI) and that could be a fee of around $10,000 to $20,000 depending on the value of the loan. It can be a significant additional cost.
If you are late on settlement, then the vendor can charge you with interest costs - the amount can be significant. So make sure you get all the paperwork ready in time.
The costs of purchasing a property doesn’t end once you receive the keys. If you are planning to live in the property don’t forget the basic amenities to allow you to live comfortably in that property. Set aside some money for utilities, moving costs, furnishing costs, and the bare essentials.
These are almost all the main expenses that you're up for when you're buying a property. Make sure that you are aware of these costs and know how they may impact your buying power. Ask your broker or your finance specialist whether there are any extra costs with your loan. Add these costs to your budget to avoid any nasty surprises so that you can truly enjoy the rewarding experience of purchasing a new property.