So you’ve found a great home loan product and are eyeing your dream property. But are you really ready to buy? To find out whether you’re in a position to take on the financial obligations of owning a home, take a look at our list of the costs involved pre-purchase, during transaction and post-transaction. Costs vary a great deal, depending on the property’s features, type, location and value. They can be well hidden, but will still need to be factored in.
If you’re buying and selling real estate in NSW, make sure you’re clued up on all these little (and not-so-little) fees and charges that you may well encounter on your home ownership journey.
The following fees and charges can be expected at the beginning of the property purchase process.
Checks structural soundness and lists visible defects and any repairs needed. The approximate cost for these reports is in the range $300 to $700.
A pest inspection is required to check for signs of past or present pest infestations. The approximate cost for this will be around $200 to $350.
Another necessary inspection is the strata inspection which provides relevant information about strata levies and insurances. This report examines and feeds back on the written records of the owners’ corporation and is in addition to the certificate a seller supplies. The cost will be around $200 to $350.
Lenders typically ask for a survey report, which shows where the property is in relation to the land boundaries. These can cost between $400-$700.
Legal and Conveyancing Fees
The process of transferring a property from seller to buyer is called conveyancing. A conveyancer or solicitor can be engaged or you can handle the process yourself. Fees vary, as they are not set, so make sure you obtain a written fee estimate from your conveyancer or solicitor before engaging them.
Depending on how complex your transaction is, there will usually be a range of legal professional or conveyancer fees to bear in mind. For townhouse or unit purchases, the conveyancer may need to conduct title searches, make strata reports, review contracts of sale, check encumbrances, covenants and easements, as well as conduct negotiations for all settlement details.
Fees and amounts paid on your behalf during the conveyancing process by your solicitor or conveyancer will need to be reimbursed. These disbursements may include title searches, local council or water authority searches, drainage diagrams, land tax, Roads and Traffic Authority enquiry charges, council rate enquiries, and so on.
If you have had a buyer agent searching for and purchasing property on your behalf, you’ll need to cover their fee.
Home Loan Application Fee
Charged by the bank or other lending body when you apply for the loan, usually around $800. There can also be further costs preparing and registering the mortgage.
A formal valuation of the property you are buying will usually be required by your lender, and you can choose to arrange your own valuation of the property (make sure you use an accredited valuer). The fee is sometimes included in the Home Loan Application fee.
Property Purchase Transaction Costs
During the sale process, once a contract is signed on a private sale or the auction hammer falls, and the cooling-off period starts, there are a range of other expenses to anticipate.
The Deposit and the Balance
Obviously, the deposit is paid at the exchange of contracts, placed in trust and transferred to the seller at settlement. The balance of the purchase price, minus the deposit, is paid at settlement.
Stamp Duty or Transfer Duty
Government stamp duty is also known as transfer duty and the amount and due date will vary depending on your state or territory. Typically one of the single largest home purchasing costs, stamp duty is paid on the purchase price of a property (or the valuation under certain circumstances).
Lenders Mortgage Insurance
This is required by lenders when you borrow more than 80% of the purchase price. This insurance protects the lender in the event that you default on your loan and the property were to be sold for less than the outstanding loan amount. Mortgage insurance premiums are a once-only payment and will vary depending on the loan amount, property price and the loan-to-value ratio.
Property Purchase Registration Fees
A Transfer of Land is lodged with the State Titles Office by your conveyancer.
Mortgage Registration Fees
New mortgage agreements are required to be registered with the state authority government.
Another hidden cost of purchasing units or townhouses is the need to arrange building insurance before completing your purchase. Again, as with most fees, building insurance will vary depending on age, size, location and type of dwelling. Building insurance comes in two types: replacement cover (new for old), or indemnity cover (repair or reinstate your property taking depreciation into account). Building insurance can add anywhere from $220 to $1,000 to the bill.
Post-Purchase: The Ongoing Costs of Property Ownership
Apart from your mortgage repayments (principal plus interest and lender fees), you’ll obviously have the further costs of removalists, utility connections, home and contents insurance, council rates and strata fees, and any repairs or renovations.
As you can see, it’s important to take into consideration all the possible fees and charges that you may confront when buying or selling real estate in NSW, in order to get a true picture of your property ownership potential. It’s not all money flowing away from you, though. Don’t forget to check out First Home Plus, the NSW Government’s duty concession scheme for first home buyers. Exemptions and discounts on contract stamp duty for first home buyers are available. You can contact the Office of State Revenue or give us a call here at 0415 090 269 for more info.