So, you’re thinking property. Everyone knows buying a house is one of the biggest commitments you’ll ever make – and one of the biggest spends. There are a heap of things to consider and a heap of things to learn. What location do you want to live in for the next 30 years, how much space do you need, or how many children are coming along? Not to mention, ‘How do deposits work?’ and ‘What’s the difference between a home loan and a mortgage?’.
In fact, all of those big questions that come up around property are probably the reason you’re here reading this. Like you probably know, there are more expenses involved with buying property than you think — and it’s not just that your landlord won’t fix your leaky faucets for you anymore.
Deposit & Home Loan
The two biggest expenses, that we should all know about are of course, the deposit and the home loan. What you may not realise about these is that it’s possible to shop around and the prices, rates, and details can vary in the thousands. Prior to securing the loan for you, you should be thoroughly researching different lenders and banks, and considering your other expenses. How much are you eligible for? What interest rates would you be looking to pay? Can you have the loan processed with a minimal fee? Remember: it is possible to opt between a floating interest rate and a fixed one.
This can be really tricky, there are a lot of decisions to make and plans to predict. The good news is that there are free online tools around to help you out. A home loan calculator, for example, is the perfect resource for someone who’s trying to work out what they can afford and for direct comparisons between different banks and lenders.
Home & Contents Insurance
Most banks or lenders will have you insure your home as a requirement of the loan. Plus you’d be a bit silly not to insure the biggest purchase of your life. As a renter the only real concern around insurance is contents insurance to cover your important home items like furniture, electronics, and some of your big-ticket items.
While contents insurance is still important to a homeowner, insuring the home itself is definitely a priority. Home insurance is pretty similar to car insurance. The price is determined by considering a combination of factors. What area will your home be located in? How much is it worth? Is it new and well-built or is the structure less than ideal? What does your credit look like and have you made insurance claims in the past?
Home insurance is a large financial aspect that’s worth considering in your first home budget.
Stamp Duty & Rates
Stamp duty is a state government tax on your property. The amount varies from state to state and by the amount of your house. Stamp duty calculators are available to help work it out, but it’ll definitely be at least in the thousands if not the tens of thousands. Property tax, or rates are charged by your local government and the price depends again on the value of your home.
While we’re talking rates, another thing to consider with home ownership is that you’ll incur those extra bills your landlord used to pay. Like water, utilities, any damages, and servicing and maintenance (your air conditioner unfortunately does not clean itself).
Fees, Fees, Fees
The best thing to do when buying property, and especially your first home, is to save up a lot more money than you think you’ll need. There are a lot of unexpected and unmentioned fees and costs that come up throughout the process. Some of which won’t rear their head until the closing stages of your purchase (in which case you’ll just need to pay it to get on with the purchase).
There’s a mortgage application fee, where lenders charge a fee for your application. The price varies but it’s in the hundreds. Once your application is successful you may also be paying for ‘lender’s mortgage insurance’. This is typical if you paid a deposit of less than 20% and it covers you for absolutely nothing. The purpose is for the lender to have security if you default on your loan.
You’ll need to pay for the house to be inspected. This will cover establishing the value of the property and finding any pre-existing issues before you buy. There’ll be a period for the owner to fix any underlying issues that are found, but this inspection is really essential for things like structural damage, asbestos, or rust and mould.
More fees come from the legal process. Unless you’re into law or finance you’ll probably need to hire someone to help you understand and examine any contracts and to exchange them.
As if that’s not all enough, there are then all of the closing costs. To process your purchase there are private agencies and government officials involved. There’s a fee to exchange the home into your name and recording fees, you’ll need to pay for someone to record that the property has been transferred to your name — for public land records.
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