Although mortgage payments are the most common and obvious expenses associated with purchasing a property, there are many additional costs and fees that may come as a surprise if you’re not prepared.
Read on, as we break down every hidden cost of buying a house and provide information on what you can expect.
How To Estimate Your Property Buying Costs
Before we continue with the hidden costs, it’s best we start with the upfront home buyers’ costs that you might face.
The deposit is the highest and most notable cost when making a purchase. A rule of thumb is that the greater the downpayment, the better the interest rate. While most lenders require a deposit of 20% of the home purchase investment, there are some willing to grant you a loan with as low as a 5% deposit, but some additional costs might add up.
Another important upfront cost is your mortgage repayment. Before taking out a home loan, you should consider your financials thoroughly and contact an independent financial adviser or mortgage broker who can help you make the right decision.
You might be interested in: How To Get a Home Loan in Australia To Live Comfortably in 2022.
Hidden Cost of Buying a House
It’s easy to overlook some of the additional expenses that come with purchasing a property. So, what fees are involved when buying a house? Let’s take a look.
1. Stamp Duty
Stamp duty is the biggest hidden cost when buying a house. It’s charged when a property is transferred to another owner, and the amount is calculated based on the property’s current value.
Some of the factors that dictate the cost of stamp duty include the purpose of buying the property, the value and state of the property, whether the purchaser is a first-time homeowner, and more. Just to be safe, use an official stamp duty calculator for accurate results.
2. Ongoing Fees
When purchasing a property, you will need a lender that will deal with the administration, the servicing of your loan, and the maintaining of your home loan. These fees are either paid monthly or annually. However, the prices vary from one lender to another, so it’s best to consult with them regarding the application fee, as they can give you an offer in accordance with your needs.
3. Lenders Property Valuation
Before buying a house, potential buyers want to make sure they are making the right decision and not overpaying for it. For that reason, they usually hire an independent valuer to help them assess the property’s estimated value and advise them on whether or not the house is listed at a reasonable price.
4. Mortgage Insurance
If you have less than a 20% deposit, you are likely to be required to pay for mortgage insurance that guarantees the coverage of any losses in case you default on the monthly repayments. The cost can either be included in your loan amount or could be paid as an up-front fee.
5. Building Insurance
Another cost involved in buying a house comes with building insurance. You should have this type of insurance in place when you sign the contract of sale. If something were to happen, such as fire or storm damage, during the process of signing for ownership and before you get settled in the house, you could get yourself in a lengthy legal process and create further expenses.
6. Contents Insurance
Aside from insuring the house itself, you might want to insure the valuables you have inside as well. Contents insurance covers for the damage to your personal belongings like fridge, furniture, television, etc. Work out how much your valuables are worth to decide on what insurance to get.
7. Building Inspection
To avoid any future expenses, you should be aware of the condition of a property before you buy it, whether you’re buying a brand new or a pre-owned property. When hiring a professional building inspector, they have a detailed list of what they look for in properties in Australia, like faults in the property, identifying any safety hazards, structural problems, and hidden moisture issues.
A pest inspection, on the other hand, would check for the presence of pests or termites. Usually, the cost of the inspection starts at $300; nevertheless, if they detect a problem in the property, there is a chance you could negotiate a reduced price with the vendor.
Additional Fees of Buying a House
Aside from the costs associated with insuring your property, there are some supplementary fees that you might have to face. So, what are the additional hidden fees involved in buying a house? Let’s take a look.
Loan Application Fees
When you apply for a loan to purchase a property, the lender, usually the bank, will charge you a loan application fee or establishment fee to cover the costs of the assessment of your loan application. While this fee typically starts at $150, some lenders may not charge you at all. Furthermore, loan application fees are non-refundable and are expected to be paid in full.
Mortgage Registration Fee
Another fee incurred by the government is the mortgage registration fee that needs to be paid in full once the home loan is approved. In other words, a mortgage registration fee is used to register the physical property as security on the home loan. Even though the cost ranges from state to state, the average cost of the fee is around $115–$150.
Conveyancing and Legal Fees
Lastly, conveyancing and legal fees occur when a conveyancer or other legal professional is engaged in a service to do the required legal and administrative paperwork, such as transferring the homeownership upon buying a house. A conveyancer will review the contract of sale for any potential risks and confirm that there are no debts associated with the home.
The conveyancing fees vary depending on the size of the structure, location, and other factors. With that said, these fees can cost anywhere from $700 to $2,500.
Buying a house is no easy feat, and there are a few hidden costs that can easily add up if you are not careful enough. These costs can include anything from stamp duty and property valuations to different kinds of insurance designed to protect you and your property. We explain each cost in detail and provide an overview of the additional fees that might come your way when making your home purchase.
1. What are the fees when buying a house in Victoria?
The most prominent fees associated with buying a property in Victoria are conveyancing and legal fees, mortgage registration fees, and loan application fees.
2. What fees are involved in buying a house in Australia?
Among the hidden cost of buying a house in Australia are the home loan fees. They include loan establishment fee, valuation fee, security fee, rate lock fee, and document preparation fee.