29 Oct 14
People who have bought and sold in the real estate market more than once already know that paying the deposit and taking out a mortgage to finalise the sale is a major part of the financial commitment, but not all of it. However newcomers to home buying often don’t realise that there are a number of other expenses that must be funded before they take possession of their new home.
We sell hundreds of homes to all kinds of people, and we are always surprised at the number of new home buyers who have no idea how much extra money they need once they have signed a contract to purchase a property. Here at All Residential Real Estate we like to advise clients to be prepared for these additional costs, as extra unplanned costs can cause a lot of unnecessary stress.
Of course, costs will vary depending on which state the property is located in and other differences, but the type of expense is fairly standard across the country. For example, legal fees to prepare documents, attend settlement and transfer the title could range from $1,500 to over $3,000 depending on the amount of legal work involved.
Stamp duty, or as it is known in some states transfer duty, is a state government charge usually calculated on the purchase price, which amounts to thousands of dollars. This charge is payable by the purchaser and varies from state to state. We always advise our clients to check what this cost will be before they commit to a purchase.
Most lenders require a building and pest inspection and they may also require a loan establishment fee. Some lenders waive this fee under certain circumstances, but it pays to ask first. Add to that charges to prepare loan documents, and fees to have the property valued by an independent expert. Council and water rates, legal searches and title registration fees add a few more hundred dollars to the total, which by now is really starting to mount up.
The other major cost is lenders mortgage insurance. This is paid by the purchaser to insure the lender against default where the mortgage is more than 80% of the value of the property. On a $500,000 property, this can cost up to $8,000. The only way to avoid paying this hefty sum is to pay a larger deposit and while we do ask our purchasers if they are aware of this insurance premium, the final decision on whether to proceed is up to them.
Using the $500,000 property as a base calculation, all these additional costs could add upwards of $17,000 in addition to the deposit. If purchasers are aware, have obtained accurate costs and are prepared to pay them, there is no reason why they should not proceed and buy their dream property.
Here at All Residential Real Estate we certainly don’t want to deter buyers from home ownership, but we do want to be ethical and make sure they are buying from an informed position. This helps make the purchase experience more straightforward and less stressful for our clients.