Costs Buying a House and Getting a Home Loan

Along with the costs of checking out the property you are buying and physically moving from the one you are now in, there are a number of government fees, taxes, legal fees and lender fees incurred when you go for a home loan and buy a new home. Remember that most of these are paid before or around the time your property settles, so your savings or loan will need to cover these amounts as well.

Typically, you would plan for these fees when you are purchasing:

Lender Fees

Many lenders will negotiate on fees dependent upon your situation. Some may waive some or all of the fees which relate to your loan. However as a rule of thumb, the complete absence of up-front fees generally means a higher interest rate or ongoing fees.

Ø  Loan Application Fees.

Ø  Loan Establishment Fees

Ø  Valuation Fees Legal Fees (relating to the Mortgage) 

Ø  Account Transaction Fees

Ø  Exit Fees and or Deferred Establishment Fees 

It is difficult to give a guide to the amount for each fee, as they differ so much among lenders. By way of example, the application fee amount may be nothing or as high as $600, or more. It is extremely important to be very clear on these costs up front and ensure your broker negotiates where possible.

Lender's Mortgage Insurance (LMI)

Whenever you have less than a 20% deposit, you will almost always have to pay mortgage insurance or LMI. This insurance is a one-off payment by the borrower to the lender (or lender’s insurer) to “insure” the loan. It insures the lender for any shortfall on a loan, so if you were sold up because of defaults, it covers the difference between what you are sold for and the amount still owing.  Up to 95% loans (or 5% deposit loans), the amount would typically be up to 1.2-1.5% of the loan amount. As you get closer to 80% home loans (or 20% deposit), the cost usually lowers substantially. If you have a 20% or more deposit, and all other factors are in line, LMI is generally not charged.

There may be some lenders who can help you reduce up front costs by adding LMI and other fees into the total loan package. While this can look like a very attractive option, make sure you check this and understand what it really means in terms of real cost over the life of the loan.

Stamp Duty, Mortgage Registration, Mortgage Stamp Duty and Registration Fee

These taxes/fees are state government- based fees and are applied according to the law of the state where the property is (i.e. not the property that you live in, if you reside in another state). Each state government calculates these fees differently.

 Stamp duty is payable in all states, but some groups such as those below are entitled to different exemptions or reductions on stamp duty:

Ø  First-home buyers (All states)

Ø  Home buyers with Concession Cards (Victoria)

Ø  Principal Residence Rebates (WA/NT).

Legal Fees

When purchasing property, you would usually employ a solicitor or conveyance to look after the property exchange paperwork. Dependent upon the value of the property and the state you live in, this can cost as little as $200 plus disbursements up to over $1000, depending on complexity. Get quotes.

 Building Inspection Reports(and structural)

Building inspections are highly recommended and are sometimes a condition of loan approval. It is always a good idea to have one done irrespective of the lender’s loan approval conditions. Expect inspections to cost somewhere between $250 and $500.

Pest and Termite Inspections

A pest and termite inspection typically costs between $200 and $400, and is also highly advisable, if not legally required.

 Moving Fees

Don’t forget to factor in the cost of mail redirection, furniture removal, connecting the power, gas and phone.