The cost of buying a property is a huge financial burden that cannot be avoided if you need a home loan. If you are trying to work out the cost of buying a property you will generally need about 15 percent of the purchase price s an up front cost. Here is a guide of the costs involved:
- Deposit – whether you are a first home buyer or are planning to refinance, you should plan to save at least 10 percent of the purchase price for your deposit. While the majority of home loans will allow for less than 10 percent deposit (generally to as little as 5 percent) it will make it easier for you to have your application approved and you will have more choice and hence a better deal with 10 or more percent.
- Application fees and upfront costs – most lenders will charge you a fee to process a home loan application and there are also other cost of buying a property including legal fees and valuation fees.
- Lenders mortgage insurance – also know as LMI. If you are planning to borrow more than 80 percent of the purchase price, you will generally be charged lenders mortgage insurance to cover the lender from you defaulting on the loan. The price of LMI can be as much as 2% of the loan value.
- Stamp duty – this is a tax that you must pay when purchasing a property. It varies in each state and there are government incentives for first home buyers and for newly built properties so check your State Government’s website for more details.
- Repayments – lenders will charge you interest on the money you borrow and most loans offer repayments fortnightly or monthly. Some loans charge a monthly service fee so shop around to find the best rates and fees online.
Australia’s leading home loan comparison site, RateCity.com.au has a home loan calculator which is a great tool to help you understand the repayments you’ll have to make for your home loan. You can also compare variable rate home loans, as well as fixed rate home loans and the increasingly popular self managed super funds (SMSF) loans.