Extra costs when buying a home

When taking out a mortgage, many people forget to consider the fees and expenses that come on top of the purchase price of the property.

Here are some of the extra costs that you’ll need to consider when you take out a home loan.

Home loan application fees

Some lenders charge a home loan application fee. The fee will depend on the loan you are applying for and the lender.

Home loan application fees cover:

• •loan contracts
• •property title checks
• •credit checks
• •attending a settlement.

Mortgage fees and costs

• •Mortgage establishment fees – lenders generally charge a mortgage establishment fee, which is a fee for setting up a mortgage.
• •Property valuation fee – a third party chosen by the lender, is appointed to determine the value of your land and improvements.
• •Mortgage registration – your mortgage deed needs to be registered with the government. Some State Governments charge stamp duty to register your mortgage.
• •Lenders Mortgage Insurance – if you don’t have 20% of the purchase price or the value of the property, the lender will require you to pay for a lenders mortgage insurance policy that covers their risk in the event you default on your repayments.

Property fees and costs

• •Building, pest and electrical inspection fees – it’s wise to have your property inspected for any structural or electrical problems and for pests.
• •Registration of transfer fee – the new owner of the property needs to be registered at the land titles office.
• Transfer Duty (formerly Stamp Duty in NSW) - you will need to pay this when you buy a home. If you’re a first home buyer, you may be entitled to a concessional rate of transfer duty, or even an exemption from paying it
• •Legal fees – you generally need to pay a solicitor or settlement agent/conveyancer to handle the transfer of ownership of the property on your behalf.
• •Home and contents insurance – most homeowners insure their home and contents against a range of threats, such as burglary, fire, storm, etc. Lenders insist that your property is insured while you have a mortgage.
• •Life and income protection insurance – borrowers should consider protecting their incomes and themselves while they have a mortgage.
• •Utility costs – connecting electricity, gas and telephone can attract a fee.
• •Council rates – your local council charges rates to cover garbage collection and a host of other services.
• •Water rates – the water corporation charges rates for the supply and upkeep of water to your property.
• •Strata / body corporate fees – if you buy an apartment or strata titled property, body corporate fees are charged, and some fees can be significant, particularly if the building is in need of a major work, or if there are lifts, pools and other communal facilities.
• •Maintenance costs – don’t forget to make provision for regular maintenance on your home, even if you decide not to undertake significant renovation.