- June 26, 2020
- Posted by: Shaniya Xuereb
- Category: First home buyer, The buying process
When buying a property the contract price isn’t all you are going to pay. On top of the price, there are some hidden costs that you’ll need to be aware of and make your budget accordingly, especially for those who are first-home buyers.
When it comes to property purchase, it is important to know all the possible expenses to ensure that you have got enough money in your account to settle the property smoothly without any delay in the whole process.
First and foremost, we have to mention the stamp duty. Stamp duty is the government tax you need to pay on the property transaction, which also known as “land transfer duty”. How stamp duty applies to your property purchase is based on your particular case, varies depending on where you live, what property type and value you are buying, whether you are a first home buyer, whether you’re buying for owner-occupied or investment, and so on.
Generally, you need to pay stamp duty within 30 days of settlement, and it’s unlikely you can defer your stamp duty payment.
It’s important to understand the stamp duty exemption and concession to check if you are eligible to entitle those benefits. For example, if you are a first home buyer in Victoria and the property value is under $600,000, you won’t pay any stamp duty.
You can try our stamp duty calculator from Credit Hub website and find out how much you need to pay roughly or talk to us to discuss your scenario.
Conveyancing & Legal fees
Although it’s possible to complete the property settlement by yourself, it’s highly recommended to hire a conveyancer to do all the work for you from start to finish and give you in-depth legal advice of ownership, formulating the legal documentation for you and being your legal representative during the settlement process.
The fee can range from $500 to upward $3,000, depending on the level of service you require. Normally, a solicitor charges more than a conveyancer. For those first home buyers, have your contract reviewed prior is significantly recommended based on my experiences as a conveyancer.
Building & Pest inspection costs
As we have discussed in our previous blog, building and pest inspections can safeguard property buyers from those fault-ridden properties by revealing the hidden or latent defects in the property, especially crucial when it comes to old properties.
I’ve seen a lot of people didn’t do these inspections in the first place and ended up with costly issues later. Even if no major issues are identified, you can further negotiate in regard to the purchasing price with some minor problems identified. I would definitely say the money should be spent anyway and it’s well spent.
Mortgage registration fee
The mortgage registration fee is charged by state and territory governments to register the security for a home loan, which is often overlooked by property buyers due to the fact that it’s a minor cost ($116.80 in Victoria). The fee is payable when establishing or discharging a home loan.
Title Transfer fee
A transfer registration fee is charged by the governments in terms of transferring the Title of the property from the previous owner to your name.
From 1 July 2018, the transfer registration fee in Victoria is $96.10 + $2.34 for every whole $1000 portion of the Purchase Price with a Maximum fee of $3,606. For example, if you purchase a property at the price of $500,000, you need to pay $1,266.1 for the transfer registration.
Loan Application Fee
A loan application fee is a once-off fee charged to a potential borrower for setting up a home loan, also known as the loan establishment fee. Loan application fees may be required for all types of loans and are payable when you submit a loan application.
The fees are approximately $600, can be lower or higher depending on the loan and lender. However, sometimes, lenders will waive a loan application fee for you in some circumstances.
Apart from the above-mentioned costs, please also keep in mind that, you will need to pay mortgage insurance if the loan-to-value ratio (LVR) * is above 80%. You can talk to our Mortgage Broker for more information.
* LVR is the percentage of the total value of the property or asset that you’ve borrowed. LVR is calculated by dividing the loan amount by the actual purchase price or valuation of the property, then multiplying it by 100.
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