First Home Buyers Guide

FEES - THE REALITY CHECK

I mentioned you will need savings to cover off fees for the purchase and unfortunately this is probably the most disheartening part of the experience. Try and stay positive though because when you finally get your house it will be worth it.

Your bank will facilitate the payment of fees upon the settlement of the loan as long as you have the cash to complete then you will pretty much be none the wiser. Apologies upfront but there are a few to get through.

As a conservative guide you will need about 5% of the property purchase price for fees.

BANK FEES

It is pretty common these days to get home loans without application or establishment fees. That being said, there are lenders that do charge these and the amounts can vary as well so check your bank’s fine print.

You can expect the price to be anywhere between $0 and $1800 depending on the lender. Generally speaking most banks will cover the cost of property valuation and mortgage preparation fees within the application as well whether it is waived or not.

LENDERS MORTGAGE INSURANCE

This is a fee incurred when your deposit is less than 20% of the property value in case the bank has to step in if you can’t foot the bill.

The amount depends on the value of the property and can be pretty expensive. A 5% deposit on a $500,000 property will cost between $15,000 and $19,000 depending on the bank. Don’t panic if you don’t have a spare $15,000 lying around though; some lenders will allow you to add this onto your loan amount.

Avoiding LMI can be done if you work in a specific industry, if you appoint a guarantor, and in some cases if your deposit is close enough to 20%.

GOVERNMENT FEES AND CHARGES

STAMP DUTY

This is a fee incurred when your deposit is less than 20% of the property value in case the bank has to step in if you can’t foot the bill.

The amount depends on the value of the property and can be pretty expensive. A 5% deposit on a $500,000 property will cost between $15,000 and $19,000 depending on the bank. Don’t panic if you don’t have a spare $15,000 lying around though; some lenders will allow you to add this onto your loan amount.

Avoiding LMI can be done if you work in a specific industry, if you appoint a guarantor, and in some cases if your deposit is close enough to 20%.

REGISTRATION

Whenever a property changes hands there are associated government registration costs because there is no such thing as a free lunch. Below is a summary of what to expect:

Transfer registration ($165) – incurred whenever a property changes hands.
Mortgage registration ($165) – State Government’s fee for registering a mortgage.
Title searches ($25) – conducted in order to check the details on the certificate of title are correct and to see if there are any encumbrances (caveats, covenants or mortgages) on the title which could prevent the execution of the transfer.

RATES ADJUSTMENTS

You will be required to pay an adjustment for shire water and council rates. This amount will depend on how long is left in the current year’s billing period. So for example if you’re halfway through the billing period, you will pay half the annual rate.

CONVEYANCING/SETTLEMENT AGENTS

This covers the cost of actually making the settlement happen including the preparation of paperwork to change the name on the titles, registrations at the land titles office, water and council rates adjustments and so on. You can settle a property independently but generally speaking it is better left to the experts. It would be reasonable to expect a fee of $1500 – $2000 for these services. It pays to have a good settlement agent working on your purchase because there is nothing worse than missing a settlement due to incorrect paperwork.

BUILDING AND PEST INSPECTIONS

These fees are optional but in my opinion they are worth every penny. Do you buy a car without taking it for a test drive or looking under the hood? You want to make sure you know exactly what you are buying. A building inspection will make sure that the house is structurally sound and trust me – this is something you want to know before you buy because having to replace structural beams in your roof will not be cheap. Same goes with the pest inspection. While termites are not as common these days, it’s not a surprise you want to deal with. Getting these two inspections done could be the most important $800 (approx.) you ever spend.

HOME INSURANCE

In this day and age your bank will likely require confirmation of insurance held on the property you are looking to purchase. It is required before settlement occurs and typically your insurer will allow you to set the date at which it kicks off.