When taking out a mortgage, many people forget to consider all of the associated fees and expenses that come with it.
Here are some of the extra costs that you'll need to consider when you take out a home loan.
Home loan application fees
Some lenders still charge a home loan application fee. This can range from loan to loan, and covers:
- Loan contracts
- Property title checks
- Credit checks
- Attending a settlement
Mortgage fees and costs
Mortgage establishment fees - Lenders generally charge a mortgage establishment fee - a fee for setting up a mortgage.
Property valuation - A third party chosen by the lender, is appointed to determine the value of your land and improvements.
Mortgage registration - Your mortgage deed needs to be registered with the government.
Mortgage stamp duty - Some State Governments charge stamp duty to register your mortgage.
Lender's mortgage insurance - If you don't have 20 per cent of the purchase price or the value of the property, the lender will require you to pay for a lender's mortgage insurance policy that covers their risk in the event you default on your repayments.
Property fees and costs
Building, Pest and Electrical Inspection fees - It's wise to have your property inspected for any structural or electrical problems and for pests (e.g. termites).
Stamp Duty - Governments charge Stamp Duty to transfer the ownership of a property. This is based on purchase price and can be a substantial cost.
Registration of transfer fee - The new owner of the property needs to be registered at the Land Titles Office.
Legal fees - You generally need to pay a solicitor or settlement agent to handle the transfer of ownership of the property on your behalf
Home & contents insurance - Most homeowners insure their home and contents against a range of threats: burglary, fire, storm, etc.
Lenders insist that your property is insured while you have a mortgage.
Life and income protection insurance - Borrowers should consider protecting their incomes and themselves while they have a mortgage.
Utility costs - Connecting electricity, gas and telephone can attract a fee.
Council Rates - Your local council charges rates to cover garbage collection and a host of other services.
Water Rates - The water corporation charges rates for the supply and upkeep of water to your property.
Body corporate fees - If you buy an apartment or strata titled property, body corporate fees are charged, and some fees can be significant - particularly if the building is in need of a major work (e.g. concrete cancer, security upgrade, new hot water system, etc) or if there are lifts, pools and other communal facilities.
Maintenance costs - Don't forget to make provision for regular maintenance on your home. Even if you decide not to undertake significant renovation, there are still ongoing costs.
To learn more about the hidden costs of buying a home, arrange for an appointment today.