Costs To Allow

As a Home Buyer you likely think that the only cost to allow for is deposit & stamp duty. However there is more than meets the eye. Here are the typical costs we suggest to allow.

Stamp Duty

Stamp Duty is a tax that state and territory governments charge for the transfer of property. The cost of stamp duty is calculated based of the purchase price, state & use of property amongst other factors. Typically, stamp duty costs are 4-6% of the purchase price of a property

Certain states and territories have introduced Stamp Duty Concessions and Exemptions to allow for no stamp duty tax payable up to a certain amount or a concession rate. It is designed to reduce the upfront costs to home ownerships for First Home Buyers meeting criteria.

Typical cost: Use a calculator

Mortgage Registration Fee

This is a fee charged by state & territory governments to register a mortgage with the titles office. Unless you are purchase a property without a mortgage this will be applicable.

Typical cost:  $100 – $200. Use a calculator for accuracy

Land Transfer Fee

This is a fee charged by state & territory governments to transfer a title between parties. This cost is affected by the state of purchase and the purchase price. 

Typical cost: $100 – $5,000. Use a calculator for accuracy

Lender Fee

This is a fee charged by the lender for the application of your loan. The fee may include valuation charges, mortgage discharge fees, security administration, loan administration or application fee. This fee can change depending on your loan product, borrowing amount, lender, etc. You broker can endeavour to waive all these fees at the time of your loan application.

Typical cost: $300. Speak to your lender to waive these fees

Legal Fees

Though you can represent yourself in the transfer of property, we highly recommend avoiding this & using a conveyancer or solicitor. These are professions who specialise in the transfer to titles and funds at the time of settlement. 

A conveyancer is someone who specialises in the transfer of property titles whilst a solicitor is a lawyer who also transfer titles. Typically either of these will be sufficient, however, if you are doing complex loans such as loans with guarantors, loan in trusts or SMSF (self manages super fund) loans then a solicitor may be more practical.

A conveyancer or solicitor will be able to assess your contract of sale before you sign to ensure there are no particulars you should be aware off, conduct relevant title checks and utility checks. They will be able to put in any special conditions you have agreed upon with the seller, such as cutting grass, and will be your primary point of contact going forward should you have any information to relay to the seller. Your lender or mortgage broker will work with your conveyancer/solicitor to ensure all the documentation is ready for settlement day. At settlement day, they will be the ones to transfer fund appropriately, pay your stamp duty & transfer the title into your name.

Typical cost: $1,200

Building & Pest Inspection

A building & pest inspection can be done on any property – new or old; apartment, townhouse or free standing home. The purpose of a building & pest inspection is to uncover any hidden issues with the property you are looking to purchase. This will help you avoid any expensive rectification works and can be used to negotiate a new purchase price. It is best practice to engage a registered building practitioner. Findings they may uncover include termite damage, water damage, structural damage, cosmetic damage, illegal building works, issues with titles & boundaries or to name a few. They will also be able to assist with identifying any works still covered by domestic builders insurance.

Typical cost: $500

Buffer 

A buffer is a sum of money that, though is not mandatory, we recommend to have in case an unexpected cost arises. This may include adjustments at settlement, increased value of an aforementioned allowance, variations, etc. This will save you scrounging around for money at the last moment should you fall short somewhere else. It is also good practice to have a buffer as lenders will look favourable on a loan application that has surplus funds post settlement.

Typical cost: $2,000

Lender Mortgage Insurance (LMI) / Risk Fee

Lender Mortgage Insurance or a Risk Fee is charged by lenders for high risk loan applications. This is typically when you borrow more than 80% of the purchase price. Lenders mortgage insurance does not cover the homeowner, but the bank in the event they reposes your home & sell the home for less than the remaining loan balance. Though it does not protect the homeowner they are the ones who pay this costs at the time of application. This can be capitalised into your home loan to reduce upfront costs. 

There are currently government schemes to help reduce this costs as well as specialised lenders who charge a risk fee which is cheaper than paying LMI. A savvy mortgage broker would be able to suggest cost effective options that also meet your needs. There is also the possibility of getting a partial refund on your LMI should you build enough equity within the first 24 months of entering into the loan agreement. It is best to speak to a lender or mortgage broker about lenders mortgage insurance as there are many options, lenders and solutions available that you may not yet be aware off.

Typical cost: Use an LMI calculator. However, best speak to your mortgage broker about alternatives to save costs.