Cost associated with property purchase

Property buyers, especially first-time buyers often neglect to factor in the cost associated with their purchase additional to the price of the property they're buying.

Being aware of this cost will ensure smooth sailing during your purchase journey as it will determine how much cash the buyer needs to contribute towards the purchase.

From legal costs to removalists, plus government fees and charges associated with property being purchased can end up adding thousands of dollars to the purchase price, sometimes as much as five to 10 per cent. 

By having the foresight to factor in these additional costs you can avoid placing added pressure on yourself as well as your budget. Here are the key extra costs you should consider:

Stamp duty

Stamp duty will most likely be the biggest financial outlay home buyers will encounter, but just how big is solely dependent on the purchase price of the property. 

Before you start to calculate possible liability, check whether you receive any stamp duty exemptions or concessions.

Some first home buyers are able to take advantage of stamp duty breaks if they are purchasing below a predetermined threshold.

These concessions vary from state to state, so be sure to do your homework to find out exactly what you may be eligible for.

Lenders mortgage insurance

If you intend on borrowing more than 80 per cent of your property’s purchase price, you’ll most likely have to pay lender’s mortgage insurance (LMI). This fee doesn’t protect you as a borrower but rather the lender in the event you default on your loan. 

LMI is a one-off premium, paid upfront or capitalised into your loan. The premium you pay will be based on the purchase price of the property, the size of your deposit and the style of loan you select.

Conveyancing (Legal)

Legally transferring a property into your possession comes at a cost. This is the fee associated with contracts and other legalities. Costs will fluctuate, but expect to pay several hundred at least, depending on the service you use and the depth of advice offered.

Mortgage establishment fees

Many home buyers are caught off guard when hit with mortgage establishment fees when applying for basic home loan products.

Charges will differ from lender to lender as well as the type of loan (home loan with ongoing annual fees don’t usually have establishment fees). These fees are typically flexible and you may find that there is some level of negotiation with lenders.

Other fees

It is crucial that fees like registration – which involve registering your property – are taken into budgeting consideration as well as costs like pest inspections, building insurance and removalists.

You may also find you are slapped with fees which are solely contingent on the type of property you are purchasing – such as strata costs.

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This article via Which Investment Property does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.