Prepare for the unexpected costs of buying a property
If you're in the market for a new home or investment property there are many things to consider, but for most people cost is number one. For first time buyers in particular, the amount of hidden charges along the way can be both surprising and frustrating. It’s important for prospective buyers to do their homework well before beginning their search to keep their budget on track.
If you are seriously interested in a property, pre-purchase inspections can be expensive but are necessary. The property should undergo thorough building, land and moisture inspections before any contracts are signed to make sure issues are picked up before purchase. Costs for this can vary from anywhere between $200 - $1000, so it’s worth shopping around. It’s also important to take into consideration whether the property is in need of any renovations and what ongoing council or strata (body corporate) fees might look like. These should be factored into the budget from the outset.
Costs for a house valuation can vary but are necessary to confirm the property is sufficient to secure against a particular loan amount. The cost of a registered property valuation is usually in between $500-$1,200, but depends on size of the property, as well as location. Bank and lenders often only except certain valuations from particular companies so it’s best to speak to your adviser about how to organise one.
Conveyancers and solicitors
Once a property purchase is ready to be finalised, the expertise of a conveyancer or solicitor are needed to legalise the settlement and title transfers. Some providers charge set fees, whilst others work on an hourly rate. Depending on the complexity of the purchase, this can make a considerable difference to final costs. On average, costs are between $900- $1,500.
As an ongoing expense, finding the right mortgage is crucial. Application fees and ongoing fees differ from lender to lender so it’s important to talk to a mortgage adviser so they can compare these costs for you. If you decide to go with a fixed loan, there are often break costs for getting out of a particular loan term early.
Depending on the lender, often Lenders Mortgage Insurance (LMI) or low equity fees are charged for deposits of less than 20% and protect the lender against a payment default or if a property is sold at a price less than the loan amount in the foreclosure. On the plus side, it means that by having these in place, lenders can accept smaller deposits.
Some unexpected costs can’t be avoided; however, savvy planning, shopping around and taking the time to find the right property and providers will likely save you money in the long run.