What are the costs of being a first home buyer?
When buying your first home, the deposit isn’t the only expense you’ll need to pay. There are other upfront costs you’ll need to budget for which can vary slightly from state to state. The good news is, a broker doesn’t charge a fee and can help you with the paperwork, knowing what fees there are and other elements of buying a home.
Ideally, you will have 20% of the purchase price as a deposit on the home you want to buy. A 20% deposit means you will avoid LMI (Lenders Mortgage Insurance) and have a wider variety of home loan options available to you.
In some states, first home buyers are exempt from paying stamp duty up to a certain price or they can defer it. In others, it can add to the cost of your home. Do your research and check how much, if anything, you will need to pay.
Mortgage registration fee
State governments charge for the registration of a home loan. The reason being, the property you are purchasing is being used as security for the home loan. This needs to be registered so all claims on a property can be checked easily by any future buyers. It is designed to protect everyone.
Drawing up the contracts and finalising the settlement is done by your conveyancer or solicitor. Some conveyancers will do special offers for first home buyers to make it easier. $600 to $1,500 is a common price range for conveyancing.
Depending on your lender, you may be subjected to other fees such as monthly account fees, property valuation fees and later other fees are built in such as early exit fees. Your broker will be able to go over all of this with you and help you find a loan that suits your needs and reduces or in some cases eliminates these fees.
When you purchase your first home it is important you get proper building and pest inspections carried out. Many issues not easily visible when you view the property on your own can be uncovered in professional inspections. Issues such as rot, termites, wiring and poor foundations can cost thousands to fix, setting you back financially. Pay for inspections.
Lenders Mortgage Insurance or LMI is there to help the bank or lender not you. There are ways to avoid paying it, even without a 20% deposit. If you can avoid paying this fee you should as it could cost you thousands of dollars.
Once you have a home, you need insurance. Get this sorted as soon as possible. Home and contents insurance to cover the cost of rebuilding the home if needed and replacing everything within the home. You wouldn’t want something terrible to happen and you not be in a position to fix it. You should also consider other insurances such as loan protection, income protection and life insurance. Your broker will be able to refer you to specialists in these areas.
One often overlooked expense can add up quickly – connections. You will need to pay to have water, gas, electricity, the internet and other things connected to your property or transferred into your name. These fees vary from small amounts to hundreds. Council rates and similar expenses will also be moved to your name upon settlement and will need to be paid.
Be aware of all the expenses and ensure you have a budget for them when you buy your first home. To discuss how much you can borrow, what you need to do and to get a home loan, speak with a broker today.