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. Homebuyers will usually incur two types of costs: upfront costs when securing the loan, and ongoing costs once you’ve bought the home. It is best to always calculate your mortgage finances to be aware of both of these costs. These can be expensive, and will impact the overall cost of the loan.
Here’s a breakdown of all the upfront and ongoing costs associated with purchasing a home;
Home loan application fees
Most lenders charge a home loan application fee. Also called establishment fees, these cover the cost of the documentation of the new mortgage. 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
Some of the fees associated with getting a mortgage are;
- Mortgage establishment fees: This is a common fee charged by lenders when you apply for a loan. It might also be called an ‘application’ fee or ‘upfront’ fee.
- Property valuation fee: A fee charged by your mortgage lender for commissioning a mortgage valuation.
- Mortgage registration: The cost of the mortgage registration fee varies from state to state. Some State Governments charge stamp duty to register your mortgage.
- Lenders Mortgage Insurance: LMI is a one-off, non-refundable, non-transferrable premium that’s added to your home loan. It’s calculated based on the size of your deposit and how much you borrow.
Property fees and costs
- Building, pest and electrical inspection fees
- Registration of transfer fee
- Legal fees
- Home and contents insurance
- Life and income protection insurance
- Utility costs
- Council rates
- Water rates
- Strata / body corporate fees
- Maintenance costs
The costs involved in buying a property can go all the way up to 11% of the purchase price for some people. If you’re a first-home buyer, the costs are eased by the First Home Owner Grant and other government incentives. However, it’s best to be prepared for any miscellaneous costs by adding these into your budget so you can calculate how much you’ll need to save to buy and manage a home.
Don’t get caught out! Get in touch with us today to plan out your home loan expenses.