Saving to purchase your first home? It’s not all about the deposit. Purchasing a new home includes a number of additional fees, costs, and charges that can often come as a surprise if you haven’t done your research.
All of these costs are completely manageable if you plan, budget and know what to expect. We unpack all of the potential additional costs below:
Upfront set up costs when purchasing a new home
Upfront costs are fees that you need to pay before or during settlement.
Application fees: A home loan application fee is a once-off fee paid to the lender for setting up a home loan. The application fee can also be called an establishment fee, up-front fees, start-up fees, settlement or set-up fees. If you are not charged an application fee or establishment fee, you may be charged higher ongoing fees.
Valuation fees: A property valuation may be requested by a buyer, seller or lender. Property valuations from independent valuers and banks can cost you anywhere between $100-$600.
Loan documentation/lender’s legal fees: Are payable to cover the lender’s cost of producing the loan documents.
Lenders mortgage insurance (LMI): A type of insurance that protects a credit provider from borrowers not being able to repay their loan. The insurance is a condition of home loan borrowing where the loan is deemed risky and acts as a safety net for the bank in case you fail to make your mortgage repayments. Learn more here – link to blog.
Mortgage registration, transfer fees & mortgage stamp duty: These are fees payable to the applicable state Government.
The mortgage registration fee varies between states. The fee itself is the charge on registering a home loan, thus the property acts as security on that loan. The government requires the home loan to be registered so that future claims on the property can be checked by prospectors.
Stamp duty is the amount of tax you’ll pay on any property purchase. How much it costs will depend on a number of factors, including where you live and whether you’ve bought a home before.
For an estimate, use our Stamp Duty Calculator.
Decking out your house: This may be the first time you’ve moved out of home. You may not have any furniture, kitchenware or appliances. You might be able to get bits and pieces from family; however, you will undoubtedly need to outlay a few costs of your own, it’s important to budget for these.
Utility connection fees: You will typically have to pay a one-off fee to connect your utilities.
Gardening: If you buy in a new residential estate there may be a requirement for you to have your garden established in a certain time frame.
Ongoing costs
These refer to ongoing costs associated with owning a house.
Interest: This is one of the most important costs to consider when making your mortgage purchase decision. The interest rates offered by different lenders are highly competitive and may vary considerably. Different rates may apply depending on the product that you select and even a small difference may enable you to save substantial amounts of money over the life of the loan.
Account keeping fees: Some lenders charge a fee, usually monthly, to operate your loan account.
Annual facility fee – Some lenders charge an annual fee for your loan account, or for a package of different financial products.
Transaction fees: Some lenders charge fees when you transact via your loan account. These fees might be to withdraw extra money (for example, redraw fees or EFTPOS/BPay transactions), or to pay extra money into your loan account.
Penalty charges: Many lenders impose penalties under certain circumstances. These include fees for missing a scheduled loan repayment and making an inward payment that is dishonoured. Penalty interest rates generally apply if you have missed scheduled repayments.
Contents insurance: If you choose to protect your home contents you will need to pay contents insurance on a monthly or annual basis.
Rates: Rates are a form of property tax and are an important part of your council’s ability to fund and deliver essential community infrastructure and services. To find out more about rates, visit Know Your Council.
Discharge costs
These refer to fees incurred when you finish paying off the balance of a loan or choose to refinance with another lender.
Lender’s discharge fees: These fees cover the lender’s cost of paying out your loan.
Deferred establishment fees: These fees may apply if you decide to pay off your loan early, usually within 3 to 5 years of establishing the loan. The fees are generally calculated as a % of the initial loan amount and sometimes reduce over time. The costs can be substantial; therefore, you should consider them carefully if it is possible that you will pay off the loan within 5 years.
Discharge registration fees: These are government fees charged for the releasing of the mortgage/s held against your property.
We understand that saving for a home can be daunting at times. There are so many things and costs to consider along the way, but we promise, it’s all manageable with some careful planning!