When you are working out the finances of buying a home ready to apply for a loan, don’t forget to include those other costs that you will need to pay. These may be considered hidden costs because if you’ve never had anything to do with buying real estate you may not realise they even exist. It can come as a shock to know that you have to account for many thousands of dollars more than the price of the house. What are these hidden costs?
- Stamp duty is one of the biggest costs and even where discounts apply it still accounts for some thousands of dollars. There are two types; duty for the transfer of the property and duty for the registration of your mortgage. The amount of the former depends on the price of the property and what state or territory it is in.
- Much less, but still a cost to be paid are those essential pest and building inspections. Damage from termites can cost thousands to repair and so can structural damage so getting those inspections are certainly worthwhile. Still, they must be paid for. Don’t leave it for the seller to assure you that they’ve had an inspection done. Not everyone is honest.
- A buyer doesn’t have to pay real estate commissions on the transaction, but if you are selling your current home to buy another, you will be charged a commission by the real estate agent. This is usually a percentage of the sale price, so don’t forget to factor that into your equation when working out the budget.
- Legal costs may not seem much compared with the cost of the house, but they still have to be paid. There is a cost for conveyancing even if you don’t use a lawyer, plus you need a professional to conduct searches to ensure the current owner can legally sell it.
- There are often costs associated with your mortgage. Ask the lender what these will be.
- Lenders mortgage insurance can be avoided by saving up 20% of the price for a deposit. Otherwise the lender will charge you this extra to cover their risk. You should also consider Mortgage Protection Insurance that will take care of the repayments if you are ill or injured and can’t work anymore. If you have valuable furniture and goods, make sure they are insured during moving.
- Moving costs and renovation costs if you want to paint or replace the carpet before you move in. You might also want to purchase new whitegoods.
All these costs add up and must be figured into your budget to get a true picture of the costs of purchasing a new home, or any property, for that matter. Once you know what to expect you’ll be able to work out the kind of repayments you can cope with.