Always wondered what are upfront cost commitments of buying your new home? Well, here we have prepared a quick guide to give you an overall view with a brief idea of what to expect and consider.
The DEPOSIT is the first thing that usually pops up one's mind, but beyond that, you also need to factor in other elements such as Stamp Duty, LMI, Government Grants, Legal Fees, Bank Fees and Building Inspections.
DEPOSIT
The lenders love you if you have 20% deposit saved up but than there are also lenders who will consider you for 105 or even 5% deposit. In any case, the Real Estate Agent will generally need you to pay 10% upfront deposit on the day of sale or on the exchange of the contract of sale.
WILL I PAY STAMP DUTY?
Stamp duty is payable on any property title exchange, in general but First Home Buyers are exempt from this in certain cases in some states. Where complete exemptions are not available, some concession or discounts may still be available. Victoria and NSW have currently waived stamp duty for First Home Buyers up to a certain amount. You must always check with your State's revenue office for what's applicable to you.
HOW MUCH WILL BE MY STAMP DUTY?
If you are not eligible for exemption or concessions in your state, you will be liable to pay stamp duty on your property purchase. The stamp duty rate vary from state to state so it is best to check with your relevant State revenue office for what is applicable to you.
FIRST HOME OWNER GRANT (FHOG). AM I ELIGIBLE?
If you are a First Home Buyer, you may be eligible for a FHOG in most states. As this also vary from state to state, you must seek information from your State revenue office for your eligibility and application process. Your Finance adviser shall be able to provide you more information on this and also handle the process for you. If we are handling your Mortgage Application at Homebuyers Hub Melbourne than we do this for you in -house at no extra costs.
LENDERS MORTGAGE INSURANCE (LMI)
When you buy a property with less than 20% deposit, the banks will require you to take out Lenders Mortgage Insurance policy which is meant to protect the lender in terms of a default on the loan. This is mostly integrated in to your loan amount and is important to factor in as this increases your overall borrowing which also effect you loan repayments.
LEGAL FEES
To complete a title exchange or property transfer transaction you will need a Solicitor or Conveyancer who will handle the settlement and legal process on your behalf. They will review your contract terms, calculate and allocate who receives what payments from which party, register you property titles with the relevant government office and liaise with various parties involved to keep things on track. If you are building or buying with Homebuyers Hub melbourne than we can offer you in-house conveyancing services as well to save you from running around. Conveyancing services can cost you $700 upwards depending on the type and complexity of your transaction.
BUILDING INSPECTIONS
Building inspections and pest inspections are highly recommended for any type of property purchase. A professional building inspector will thoroughly inspect the property for any faults or works that it may require. For older properties this gives you a peace of mind by knowing what is inside of what you are buying and for new homes it will confirm if the builder has done the job that they signed for in the contract. Building inspections will cost you between $400 to $1500 depending on the level and stages of inspections required.
BANK FEES
Most people don't realise that in the buying process, there can be various forms of fees that your bank/lender may be charging. You must be aware if your bank is going to charge you any fees which may include -
- Loan Application/ Establishment fee
- Monthly fee/ Ongoing service fee
- Extra repayment fee
- Fees for any changes made during the loan term
- Early exit fee/ Refinance fee
A good mortgage broker shall be able to explain these to you during the loan process and help you make an informed decision on what you are committing to. If your loan application is being handled by us at Homebuyers Hub Melbourne, we will always explain and clarify every aspect of your loan commitments in advance.
WHEN ARE THESE COSTS PAID?
There are no set rules for this as it may depend on your type of transaction and terms of your deal but in a general practise the following sequence shall be a standard -
- Building inspections - If buying an established property)
- 10% deposit of the purchase price - On the day of purchase or on signing and exchange of contracts
- Stamp duty and Legal fees - On settlement
- Bank Fees - On application/ first withdrawal/ periodically, depending on the type of fees
- LMI - Same as loan disbursement
WANT TO KNOW MORE? Get in touch with us on 1300 200 003 and we will be delighted to help you through this journey!