Buying a Property – The Hidden Extras

Buying a home especially for the first time can be overwhelming, not only do you need to save for the deposit but you also need to factor in the added costs of buying a property, ones you may not be aware of.

Failing to account for these extra costs can make settlement time an extremely stressful experience rather than the exciting time it should be. Here is a list of expenses you need to prepare for so you can avoid any nasty surprises:

Loan Application Fees

Loan application or establishment fees can range from zero to $1000. This is a one off charge by the bank when you apply for a loan. Sometimes banks decide not to charge this, although not always so make sure you check with your lender.

Independent Valuer Fees

Every lender will require an independent valuer to assess the value of the property you are planning to buy before they are willing to lend to ensure that the property is worth the asking price. A standard valuation generally costs between $300 to $500. Some banks waive this.

Lenders Mortgage Insurance (LMI)

If you’re looking at borrowing more than 80 per cent of the property’s purchase price you’ll need to factor in Lenders Mortgage Insurance (LMI). This one off premium provides coverage for the lender, should you default (be unable to pay) on your loan.

The cost of LMI will vary depending on the amount of money you borrow, size of the deposit you put down and the type of loan you select, but allow around $10,000 for this.

If you’re short on cash, some lenders will allow you to combine the LMI fee into your overall home loan. We buy houses in Deland

If you want to avoid paying this you will need to save more for your deposit.

Protect Yourself

When you’re spending your life savings on purchasing property it makes sense to protect it. While building insurance is a compulsory requirement from your lender, there are other insurance policies that you should consider.

For example mortgage protection insurance will ensure your mortgage repayments are met should you fall seriously ill. Income protection insurance will also help pay the bills should you be involved in an accident, major trauma or illness.

Legal Help

Given the numerous legalities tied up in property transfer and purchase, the help of legal experts, namely conveyancers and solicitors, is a must.

A conveyancer specialises in the legal aspects of transferring property although it is worth noting you might need to enlist the services of a solicitor for any other legal issues you encounter.

Some conveyancers will charge a flat fee while others will charge a sliding fee based on the value of the property sale price. Expect to pay anywhere between $1000 and $3000, depending on the complexity of the structure.

Title insurance is essential to protect you from any claims against the title of your property. Expect to pay around $350.

Registration of Title is another necessary document which requires you to register the title with your state government, all for $75.

Stamp Duty

Stamp duty can be one of the biggest expenses property buyers may have to bear so it is crucial that you include these in your buying estimations.

Since stamp duty is charged by state and territory governments, the amount you will be charged will be determined by the state you buy the property in.

How much you pay will also depend on the price of your property with the levy generally charged on a sliding scale, with more expensive properties being charged at a higher rate. You can get an ideas of how much stamp duty is by using online calculators.

Building, Pest and Strata

Having a building and pest inspection carried out on any property is usually required by the lender but they are well worth investing in regardless of whether you are buying a new property or not, as trained specialists can often spot things other cannot.

If you are considering purchasing a unit or apartment, it is also in your best interest to have a strata inspection conducted – that is a report on the assets, liabilities and financial position of the apartment complex.

While having a building, pest or strata inspection completed on the potential property will cost you initially, it could be an invaluable safeguard against buying a lemon.

Expect to pay around $300- $400 for a building or pest inspection and around $200 for a strata report.

Council Rates and Strata Fees

When you buy a property, you will also be expected to pay the remaining yearly or quarterly council rates. These commence from settlement date so make sure you know what they are as each property is different. Allow for an extra $500-800.

While both owners of houses and units are obliged to pay council rates, it is only owners of units or apartments that will have to pay strata fees.

Strata fees cover the property’s grouped maintenance and building insurance fees and are collected by the building’s owners’ or manager.

Strata fees will vary depending on the age of the building, facilities, and location but you should expect to pay around $70 to $80 for the lodgement of application. As these are ongoing fees make sure you are aware of what they are so you can budget accordingly.

Allowing for a Bit More

Even though you may have done your research and restructured your finances to include all the major additional costs, you should always set aside a little extra for miscellaneous expenses that haven’t been prepared for but creep in.

Expenses, such as moving, connecting water and electricity and even mail redirection, can seem irrelevant when compared to the large fees but they still have the ability to place unnecessary strain on your finances if not taken into consideration.

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4 Questions to Ask at Open for Inspections

Buying a home can seem like a difficult task, especially if you are a first time buyer. After all, how are you meant to learn the ins and outs, specifications and workings of a home if you have never owned one before?

This is when a real estate agent can be of invaluable help. They are there to provide you with intricate details about the home itself and the property market it rests in.

If you are on the search for a new home, here are four essential questions to ask real estate agents at open inspections.

What is the value of the home?

You might know the price of the property or at least a ballpark figure, but finding out the value can help you determine if it’s fairly priced.

Ask the agent what the value is and whether that figure is based on an agent’s appraisal or an independent, professional property valuation. These two figures can differ from one another, so it is important to obtain both for best judgement.

If a formal valuation hasn’t been performed and you are serious about buying the property, then it might be a good idea to seek one from a professional.

Have you had any offers on the home?

If you are quite interested in the home you’re inspecting, it pays to ask the agent if there have been any offers on it. This can help you gauge the demand on the house and alert you if you need to jump in quick to make an offer.

The agent may even tell you if offers have been declined by the owner, which could provide you with useful information when you craft your own to submit to them.

Why are the owners selling?

Asking why the owners are selling the home could help you when you are negotiating. For example, if they have already purchased another house, chances are they would like to sell their old one quickly.

You could also ask how long the property has been on the market and if there have been any price reductions. If the home has been listed for a while, you might have the opportunity to submit a lower offer to the owner.

Do you know of any future developments in the area?

Developments, whether they are shopping malls or apartment buildings, might affect your decision to buy a residential property. If you are an investor, new developments could be a boon to your rental property. More great amenities, such as shopping centers, can lead to more interest in your home from renters.

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