Cost of buying a property
The Reserve Banks interest rate cut last week is great news for consumers, and just in time for Christmas. If you’re in the market for a property, rate cuts are a great incentive to start shopping around! If you are entering the property market for the first time, it is important to understand that whilst interest rates play a big part in the purchase process, there are other costs involved in purchasing a property, both upfront and ongoing that you must factor into the equation.
Firstly, some common upfront costs that are associated with purchasing a property include:
• Deposit – you will be required to pay a deposit on your property. Even if you are borrowing money to fund your purchase, most lenders will only lend up to 95%, so you will be required to pay at least a 5% deposit in all scenarios
• Lenders Mortgage Insurance (LMI) – for all loans with a loan value ratio of over 80% LMI is applicable
• Duties and Taxes - the government imposes these costs as part of the registration and discharge process of properties, and the total amount payable varies per state. The charges include:
a) Mortgage Registration and Discharge Fee b) Transfer Fee c) Stamp Duty
• Legal and Conveyancing Fees – it is always important that you get your own legal advice and conveyancing when purchasing a property
• Upfront Loan Costs – these costs are imposed by the financial institution you lend from. Dependant on the organisation, you could be looking at such costs as application fees, valuation fees and other set up costs that you will need to pay to be able to obtain finance
It is also important to consider ongoing costs that are involved once you own your property. Some common ongoing costs include:
• Loan Repayments
• Annual Loan Fees
• Body Corporate
• Water and Sewerage
• Repairs and Maintenance
• Agent fees if you enter your property into a letting pool
There are many cheap home loans around at the moment, enticing buyers to get into the property market. Owning a home is part of the Australian dream, and you can be part of that dream by finding a cheap home loan and understanding all of the costs involved that form part of such a transaction.
Most importantly, when you enter the market must get your own legal and financial advice when you purchase a property. This will ensure that you are aware of all costs associated buying a property before you proceed.
By Marie Mortimer. You can follow Marie on Google+
Image credit: Mehere