Costs of Buying a Property

There are many different costs involved when purchasing a property and organising a loan. It is very important that all these costs be taken into account when working out your maximum purchasing and borrowing capacity. The following discussion will give you insight into all the costs involved.  

Lender's Fees

An application fee is charged by the lender to set up of the loan. The application fee will generally cover a valuation on the property although this can vary from lender to lender. Application fees vary from nil upwards depending on the loan you are applying for.  

A valuation fee can also be charged (either as part of the application fee or separately). This fee can range from $200 to $350 for a standard residential property up to $500,000 in value. If the property is non-standard or worth more than $500,000 then the valuation fee will generally be more (please check with your Finance Advisor).

Some lenders charge a settlement fee at the settlement of the loan facility. When applicable this fee can range from $50 to $150.

Stamp Duty

There are two types of stamp duties that may be applicable when applying for a home loan: property stamp duty and mortgage stamp duty. Stamp duty is a state government fee, which varies from state to state with exemptions for certain groups of borrowers in certain states. Property stamp duty is based on the price of the property you are buying. Mortgage stamp duty is based on the loan amount. Property stamp duty represents the largest of the extra costs you will have to cover when buying a property. Please refer to our calculator 's to obtain an estimate of the stamp duty payable.

Land Transfer Registration

Land transfer registration is a state government fee charged by the Land Titles Office to register the transfer of property. The fee varies dramatically from state to state.

Mortgage Registration

Mortgage registration is another state government fee charged by the Land Titles Office to register the mortgage. Again, the fee varies from state to state.

Your legal costs

If you use a legal representative (solicitor or conveyancer) they will charge you a professional fee for the services they perform to organise and finalise the property transaction. Conveyancing fees vary form state to state. Ask your legal representative to give you an estimate of the cost.  

Your legal representative will generally perform a range of searches including a title search. A Title Search will provide details of who owns the property and if anyone else has an interest in the property. A survey may also be performed, which will check the position of the house, its boundaries and that the house is built on the correct block. It will also confirm whether or not it has been built in accordance with local council requirements. The cost of a survey is around $300.   Solicitors call these extra costs disbursements and commonly amount to $150 - $250 per mortgage transaction.

Your lender's legal costs

Some lenders require that you pay their legal costs - so it is worth finding out how much you will be charged before you go ahead. Although it is common for this cost to be included in the establishment fee or settlement fee, additional costs could be incurred. The cost can range from $130 to $500 depending on whether the lender uses outside solicitor firms to document the loan and arrange settlement. If a company or trust is involved the legal costs a lender charges may increase by approximately $200-$400 per loan.

Building and Pest Inspections

It is generally recommended to undertake a building and pest inspection of the property you wish to purchase. Building inspections will start from around $300 depending on the detail in the report and will highlight any flaws in the building. Pest reports start from around $200 and will indicate any evidence of infestation such as white ants. While it is your decision to organise these reports, it could be a small cost compared to potential unexpected difficulties down the track.

Rates

From the settlement date you are responsible for all the council and water rates of a property.   Keep in mind when budgeting that you may also have to reimburse the previous owner on a pro rata basis for any payments they have already made. Your solicitor will work these out for you.

Body Corporate Fees, Sinking Funds and Liability Insurance

When purchasing into a property that may have more than one owner you need to make allowances for a range of additional costs involved with the maintenance and insurance on the property. The Real Estate Agent will give you an estimate of these costs, however it is recommend that the costs are confirmed with your legal representative prior to purchase.

Building Insurance

Every Lender will require you to organise building insurance on the property prior to settlement (note, building insurance is generally taken care of by the Body Corporate if applicable however check with your legal representative as to the need for Building Insurance on your property). You will need to have your lender noted on the insurance policy as the mortgagee.

Lenders Mortgage Insurance

Generally, Lenders Mortgage Insurance (LMI) will apply if you borrow more than 80% of the value of your property (although this will vary from lender to lender). Mortgage insurance is an insurance paid by the borrower to cover the Lender should you default on your loan and there is loss suffered by the lender when selling the property. LMI can be very expensive and increases as the amount you borrow against the property increases. Some lenders will allow you to add LMI onto the loan where others require a once off fee to be paid at settlement.

And don't forget - home and contents insurance, moving costs and the connection of telephone, gas and electricity.

Questions to consider:

• What are the extra costs of purchasing my property?
• What fees will I be charged?
• Have I taken into account the extra money needed for fees when buying a property?
• Do I want to do my own conveyancing or use a qualified legal representative (conveyancer or solicitor)?

How can Loans Australia help?

• Help you calculate the costs associated with your property purchase.
• Organise a loan to cover some of the costs of purchasing a property if required.
• Show you how to use equity in your current home to help with the purchase costs and deposit of a new home or investment property.
• Liaise with your legal representative to ensure that settlement occurs on time every time.

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