Our Mortgage Brokers are often asked by prospective home buyers, “Exactly how much will it cost us in additional fees and charges to purchase our property?” And, perhaps a little frustratingly for some, the brokers’ answer will always be, “Well that depends upon your specific circumstances.” This is because when it comes to identifying and calculating the costs associated with buying a home, there really is no one size fits all answer.
As fees and charges can differ widely depending upon a number of variables across your particular situation and property purchase. However, as I am a firm believer in keeping things simple, I am happy to say there are just a couple of basics to bear in mind regarding your property transaction costs.
Cost You Can Expect
The most important thing to understand is that there are only a few costs which you are pretty much guaranteed to encounter when buying your property. The costs in this category are usually limited to the specific fees and charges involved with the purchase of the property itself and the potential costs resulting from the set up and creation of your home loan. However, even with these fees, there can be exceptions to the rule, as outlined below.
Stamp Duty or Transfer Duty – A state government tax which is based upon the purchase price of your property. This can be calculated with an online stamp duty calculator and will vary depending upon where your property is located within Australia. However, this can be levied at a concessional rate or even avoided in some instances. For example, with First Home Buyers in WA purchasing a property under the value of $430,000, no stamp duty is payable. Your Mortgage Broker can assist you with determining this.
Transfer Fee – A small state government fee levied for the transfer of title of the property from one person to another.
Application or Establishment Fee – This charge can be made by your lender to cover the costs associated with the set-up and initial admin of your home loan. However, these too can vary from $0 to $600 depending upon your finance provider and in some cases can be waived when your deal is submitted via a mortgage professional. It is best to speak with your Mortgage Broker regarding this charge to find out if it is applicable to you.
Mortgage Registration – A small state government fee which applies if you have used a mortgage or home loan to fund the purchase of your property. This charge covers the registration of the mortgage deed with the state government. However, if you do not have a mortgage, this fee is not applicable.
Conveyancing or Settlement Agent Fees – In order to handle the legal requirements, documentation and settlement of your property transaction, either a conveyancer or a solicitor is an essential. These fees and charges again will vary but there are maximum fee levels set by law. For example, on average you could pay around $1000 to $2000 depending upon the value of your property.
Other Costs to Consider
With the balance of the other potential fees and charges associated with your property purchase, it’s very much a case of checking with your Mortgage Broker. Which means that some costs may not be applicable to your situation, others may be optional, some could be nominal and others are just part of the process. However, in all cases it is best to be aware of these ahead of time.
Ongoing Mortgage Account Fees – These cover the management and maintenance of your loan with your lender and will depend upon which finance provider you choose and also on the type of package you select. They can range from $0 to $395 per year and some with higher costs may come with offers of lower interest rates. So check this with your broker.
Property Valuation Fee – This covers the cost of having your lender arrange for a market valuation on the home you wish to buy. This fee can often be included in your establishment fee and may even be waived depending on your lender.
Mortgage Insurance – This is usually required by the lender if your loan amount is over 80% of the value of your property, meaning that you have less than a 20% deposit saved for the purchase of your home. So for many of you this will not apply.
Building and Pest Inspection Reports - It is always wise to have the property you intend to purchase checked for structural integrity and pest activity before you proceed to settlement. These reports may cost around $500 and are recommended.
Utility Connection - As part of the preparation for taking possession of your new home you will need to set up and pay for the connection of your utilities. These include items such as internet, power, gas and water.
Council and Water Rates - During the settlement process your share of the applicable Council and Water Rates for your property will be calculated and incorporated into the funds required by you at settlement.
Home Insurance - Lenders will generally require that you take out home insurance on your property to cover the building in case of unforeseen damage to your home. The cost of this will be determined by the type of home, its age, location and the value at which you insure your property. Strata Fees - These charges apply only if your property is part of a grouped or shared development such as units, villas or apartments. The strata fees usually cover the cost of maintenance and insurance of common areas within the development.
Removalists - When you are finally ready to move into your new home you may choose to have professional removalists do this job for you or perhaps ask your family and friends to assist you. The choice is up to you. As always, if you are planning to buy a property and would like to speak to a Mortgage Broking professional, feel free to contact us here at Mortgage Perth. We’d love to hear from you. Wishing you happy buying, Harry