The Costs When Buying a Home
Whilst finding the right property is the fun part, it’s only the first of several steps in the buying process, with each step usually involving some cost. When planning for the purchase of a home, it’s important to budget for all the associated “costs of purchase” to ensure you aren’t left short at the time of settlement.Banks, financiers, and real estate companies often advertise finance options with minimal deposits required, often 5 or 10%. However, it’s not the total picture and you will usually see the words ‘plus fees and charges’ in small type.
The law relating to property transactions varies across Australia with different milestones and associated costs. So, with that in mind, let’s explore the most common costs (not all) associated with property purchases in Queensland.
- Transfer Duty – (Previously Stamp Duty) Charged by the State government on all property purchases. It’s calculated as a percentage of the purchase price and there are some concessions for 1st home buyers and people buying a principal residence who meet specific criteria. See the Treasury website for more information on transfer duty.
- Titles Office fees – This is a State government fee to register the change of ownership and any mortgage against the title of the property (where a home loan is involved). Again, some concessions may be available depending on eligibility.
- Conveyancing – Professional fees charged by law firms offering conveyancing services to manage the transaction from start to finish. Hewcorp Finance recommends consulting a lawyer before signing a contract with many firms offering pre contract review services at no additional cost. Your lawyer will engage with the other party and any financiers, brokers, accountants, real estate agents etc to ensure a smooth settlement of the transaction.
- Accountant – You may encounter tax implications when purchasing commercial or residential investment property. Getting appropriate advice from an accountant BEFORE signing any contract may save you money at tax time.
- Pest and Building Inspection – Two of the most common checks undertaken by home buyers are pest and building inspections. They’re designed to ensure the property is structurally sound and there are no termite and other pest infestations or damage to the property. There are also many other searches available that the buyer’s lawyer will discuss and initiate at additional cost.
- Finance related costs – These include:
- Bank application fees.
- Bank legal and settlement fees. (Often incorporated into the application fee.)
- Valuation fees. (Lenders obtain a formal valuation on the property to confirm its value.)
- Lenders Mortgage Insurance (LMI) – Paid by the borrower but protects the bank in the event the borrower defaults on the loan. LMI applies where a borrower requires more than 80% of the purchase price in borrowed funds. Some lenders will add LMI to the loan provided the borrower qualifies, and others don’t.
- General home insurance – Most lenders require the borrower to purchase home building insurance as a condition of the loan.
This list is not exhaustive and is designed to highlight the potential costs associated with property transactions. In addition to a basic deposit you may need several thousand dollars to cover these purchase costs and that’s something the glossy advertisements don’t tell you.
Property transactions can be a complex area of law. Hewcorp Finance will work in partnership with you and your legal representatives to ensure a smooth transaction.
This publication covers legal issues in a general way. It is intended for information purposes only and should not be regarded as legal advice. Hewcorp Finance recommends that professional legal advice should be obtained before taking any action on the basis of the general information presented in this publication.
Written and Published by www.presentprofessionally.com.au