Any time you’re going through the home purchase process, there are probably more than a few things going on that you don’t fully understand. After all, there’s a lot to consider here and even those with some experience may not realise everything that goes into the process.
Particularly for new buyers, that includes some of the often sizable costs that come with making a home purchase, as there are many “hidden fees” associated with making such a purchase. But what are they? The following list of expenses includes the most common costs you will likely face when buying a home, above and beyond the listing price:
The amount you’ll need for your deposit
Obviously this is built into the price of the home itself, but the size of your deposit is actually critical to a lot of aspects of the overall cost. Why? Because if you provide a relatively small deposit, as allowed by your lender, that’s money you will have to make up – with interest – over the life of the loan. As such, you should always strive to make the biggest deposit you possibly can to reduce your long-term borrowing costs.
Other mortgage costs
Before your home loan deal is completed, you will likely have to pay some other costs – often totaling thousands of dollars – to actually close the transaction. These include various unavoidable fees and taxes that should be built into your calculations when you’re first saving up for your deposit.
While not always required, it’s usually a good idea to pay a licenced inspector to look over every inch of your home to make sure it’s in the best possible shape. The cost of such an inspection is typically a few hundred dollars, and often well worth it.
The amount you can expect to pay in stamp duty will vary – sometimes widely – depending on where in Australia you are buying the property in question. However, factors such as whether there is already a structure on the land or if it is undeveloped will play a role in calculating your cost here, as will your plans for whether this will be your primary residence or a secondary home.
Lenders Mortgage Insurance
If your deposit is less than 20%, you will often be required by your financing provider to pay Lenders Mortgage Insurance until you make up the difference between your deposit (at 15%, for instance) and 20% of the purchase price. Depending on how much you put down, experts generally warn this could add up to as much as $10,000.
Other insurance costs
Once you actually have a home, you would be wise to make sure it is properly insured against any risk factors it might encounter. This is just proper diligence for homeowners, but it’s nonetheless something you will need to calculate as part of the overall cost of ownership.
All told, most buyers should expect to pay about 5 to 7 per cent of your home’s actual cost in all of the various fees and expenses that come with buying a home, and these funds should be accounted for as part of your larger plan. As long as you give yourself a little breathing room with a few extra months’ worth of savings, you should be in good financial shape going forward.
Whether you’re totally new to buying a home or you’ve been through the process before, it’s critical to have an experienced real estate professional by your side at every step. At Ray White Surfers Paradise, we’ve closed countless home sales over the years – and can bring the full force of that organisational experience to help you not only find the best deal but also tell you what to expect. Get in touch with us today to learn more.