Uncovering Hidden Costs in Property Purchases: A Comprehensive Guide for Homebuyers

Purchasing a property is an exciting milestone, but it's essential to be aware of additional expenses beyond the agreed purchase price. Understanding these hidden costs ensures you're financially prepared and can make informed decisions.

1. Borrowing Costs

Beyond the interest on your loan, lenders may impose various fees, such as:

• Loan Application or Establishment Fee: Charged to process your loan application.

• Document Preparation Fee: Covers the cost of preparing necessary legal documents.

• Bank Valuation Fee: For assessing the property's value to determine the loan amount.

• Title Insurance: Protects against potential disputes over property ownership.

• Registration of Title: Officially records your ownership with the relevant authorities.

• Lenders Mortgage Insurance (LMI): Applicable if your deposit is less than 20% of the property's value.
  

Negotiating with lenders might help in waiving some of these fees.

2. Legal Fees

It’s best to get expert help with transferring legal title of the property. This is a competitive area so get quotes from reputable legal or specialist conveyancing firms.

3. Stamp Duty

Stamp duty (or transfer duty in some states) is usually the biggest extra and varies widely between jurisdictions. Aside from the value of the property, the level of stamp duty may also depend on whether you are a first homebuyer and if it is a primary residence or investment property.

State and territory government revenue offices provide online calculators, and a real estate agent should be able to refer you to duties payable for different property values and usages.

4. Transfer Fee

This fee, which varies across states, covers the administrative costs of transferring property ownership. In Victoria, it's essential to check the current rates to budget accordingly.

5. Building and Pest Inspection

This is a relatively small investment that could potentially save thousands of dollars in the long run. Make sure you organise your own inspection using an independent service; don’t rely on a report provided by the vendor or real estate agent.

6. Council and Water Rates

You must reimburse the vendor for their unused portion of prepaid council and water rates that apply at the date of settlement. The amount will depend on the property value and the length of time to the end of the current rates period.

7. Running Costs

Ongoing expenses include:

• Council Rates: Regular charges by local authorities.

• Repairs and Maintenance: Upkeep to maintain property value.

• Insurances: Coverage for building, contents, and potentially landlord insurance.

• Body Corporate Fees: Applicable for properties within shared complexes.
  

Anticipating these costs helps in managing your mortgage and overall financial planning.

If ever there was a case for ‘buyer beware’ it’s when buying a property. Do your homework to uncover these hidden costs so you can work out exactly what you can afford to pay when it’s time to make an offer. Then you can break open the bubbly with confidence!      

For more insights on conveyancing and property-related topics, explore our other blog posts.

Source: ASIC’s MoneySmart website www.moneysmart.gov.au Life events and you – Life events - Buying a home

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute an advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.