Understanding The Total Cost of a Property

There is more to purchasing a property than just the purchase price. The purchase price is what the owner is paid, but you may be liable for other fees including solicitors, bank fees and government fees on top of the price.

Besides the interest and your loan structure, it is essential to understand all associated costs before signing a contract. We look in more detail at how the lender assesses your ability to repay your loan in article on borrowing capacity, which you can read here.

Everyone’s circumstances are different, and below is a general overview of the most common costs associated with a property purchase or refinance.

UPFRONT COSTS

Application fees

Some lenders charge an application fee to cover the administrative costs of assessing your loan application, such as the bank valuation.

Valuation fees

A separate valuation fee might be charged for conducting the valuation process of your property.

Registration fees

The State or Territory Government charges you with a registration fee for discharging your existing home loan and registering a new loan. This amount varies as per the location.

Lenders Mortgage Insurance (LMI)

If your equity is less than 20% of the property value or if you are borrowing more than 80% of your property value, you may be charged Lenders Mortgage Insurance or LMI when refinancing your home loan, irrespective of whether you have already paid your existing lender.

Legal Fees

It is recommended to use a Conveyancer or Solicitor to facilitate your property purchase and ensure your interests are protected. Your legal fees will vary between firms and the complexity of your purchase.

Building & Pest Inspection

Your building and pest inspection should be undertaken by a qualified professional to check if there are any hidden issues with the property you intend to purchase, from termites to water damage. The Seller may not be aware of any issues, and it is up the purchaser to do their due diligence and check.

Renovations and Repairs

You may intend to renovate a property, or during the building and pest inspection, it may come to your attention that certain repairs will need to be made. We recommend considering these costs when determining the feasibility of your purchase.

Relocation Fees

Especially if moving interstate, the removalist fees can be high, and it is best to consider them as part of your budget.

Stamp Duty

Each state and territory has a tax schedule for the transfer of property ownership, which needs to be paid at the time of purchase.

ONGOING FEES

Body Corporate Fees

If the property you are purchasing is Strata Titled, you will be legally required to pay Body Corporate fees. As an owner, you automatically can vote on how the costs are spent. You can also review the Body Corporate budgets and minutes before purchasing to ensure no known issues may require additional contributions from owners. If there are issues, be aware and work them into your budget.

Monthly or Annual fees

Your loan structure may include a monthly or annual fee in addition to interest rates. Some lenders do not charge an application fee if they have an ongoing fee.

OTHER FEES

Exit fees & Break fees

Your lender may have to pay an early exit fee or break fee to your existing lender if you close your loan early. This ”early termination” or ”early discharge fee” covers the loss to the lender by you exiting early.

Depending on your financial situation and your loan structure, you may find that only some of the fees are applicable. If you would like to discuss your loan options, chat with our team about the different loan options to minimise your expenses and maximise your budget.

Like any investment, it pays to do your research when purchasing a property, even if it is your future home. We can help you when you’re ready to start looking at rates, loan options and putting together a budget that suits your financial goals.

Disclaimer:

Terms are subject to approved persons only. This information is true and correct as of 25/12/2021. All of the content above is general in nature and may not suit your personal needs, situation objective & goals.