6 extra costs of buying property and how to prepare for them
There are a number of costs associated with buying a property that some buyers fail to account for.
Blogger: Fran Andrews, principal, Invest Conveyancing
Buying a property can be one of the most exciting events in your life.
Before you start your search, you are usually prepared with your financial details and a sizeable deposit. You may even have finance pre-approval.
What you may not be aware of is that your deposit will shrink somewhere between $5,000-$25,000 in property purchase costs, something which many of us are not prepared for.
Here are some examples of these costs:
Transfer duty
Transfer duty is a government fee that must be paid on dutiable transactions for property. This varies between states and the type of property purchased, and may be reduced by government grants. Fees range from $1,000 to $25,000-plus.
Lender's Mortgage Insurance
This protects the lender in the unfortunate event that you default on your home loan. This will vary depending on the structure of your loan and your deposit. Fees range considerably, so allow three per cent of your loan amount.
Settlement costs
Expenses during the settlement of the property include body corporate fees, rates and valuation shortfalls, amongst others. Fees range considerably, so allow up to three per cent of your purchase price.
Conveyancing or solicitor fees
Fees can be up to $3,000 for legal advice and services throughout your purchase.
Mortgage application fees
Fees of up to $2,000 cover the preparation of the loan and supporting documents, valuations and searches by your financial institution.
Building inspection
This written account of the property will give you an indication of any defects or problems. Fees range from $300-$900-plus, depending on services.
There are a number of other fees you may have to cover that can quickly add up. These include utility connections, home and contents (or landlord) insurance and moving services. Some of these can be incorporated into your mortgage, but others will need to be paid in advance.
As a guide, be prepared to put aside 10 per cent of the purchase price to cover the costs involved in buying your property. It is always better to be over-prepared than try to cover the shortfall of property expenses.
