You have been saving hard for a deposit, but how much do you need to save? Is it 10%? Is it 20% what is the real amount?
The costs associated with buying a property involves more than just the purchase price. How much you save will be dependent on whether you are a first home buyer, want to avoid lenders mortgage insurance or have the ability to have a family guarantor. Therefore, it is dependent on your situation but the more the better! It is, however, important to understand the costs of buying a property so that you can accommodate for these.
What are some of the costs involved in buying a property? It is more than just moving costs, council rates and furniture, homebuyers face additional fees to complete the purchase. Here are a few to get you thinking!
- Stamp duty: Stamp duty is a fee that is charged for mortgage documents to be legal. If you are a first home buyer, you may be eligible for stamp duty exemption.
- Legal costs: The legal transfer of ownership of the property that you are purchasing will require a solicitor or conveyancer to complete. Your solicitor/conveyancer will perform property and title searches to ensure the seller is entitled to release the property. We would highly recommend ensuring that your solicitor/conveyancer also review your contract of sale and section 32 prior to signing to ensure no surprises!
- Inspections: Pest and building inspections are an added cost to buying a house however they may save you money in the long run if you encounter major building surprises after settlement.
- Borrowing costs: Lenders often have fees associated with borrowing money. The fees may vary from lender to lender but can include application fees, valuation and settlement or loan approval fees. As a Finance Broker we are familiar with these fees and will help you to determine which lender is right for you.
- Insurance: Depending on your loan-to-valuation ratio (LVR), the ratio of your loan compared to the property value, you may be required to take out lenders mortgage insurance (LMI).
LMI is an insurance that protects the lender in the event that you default on your loan. Be aware It does not protect you as the borrower! Most lenders will charge LMI if your LVR is greater than 80% with the cost of the insurance generally dependent on your LVR.
Further to LMI, you will also be required to purchase building insurance and should also consider your personal insurance in the event that you are unable to pay your loan due to illness or injury.
Tundra Mortgage Brokers can assist you in all avenues of the buying process and help you to determine the affordability of your loan.
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