Many Australian’s are discouraged from buying a property due to the complexity and overwhelmingness of property costs.
Despite being considered complex for many, it is vital to understand property costs in order to make the right purchasing decisions.
Let us walk you through the different property costs.
Types of Property Costs When Buying
There are generally two types of property costs; upfront/one-off and ongoing costs.
1. Deposits refers to a sum of money, equals a portion of the property, which then gets paid to the seller from the buyer. The typical deposit expected is 20% of the value of the property. Due to state government grants, there are other options which may allow a smaller deposit as little as 5%.
2. Loan establishment fees, also referred to as application fees, is a fee that is charged to your account upon establishing a loan. The purpose for this cost is to cover the cost of providing credit assistance. This type of fee can cost roughly between $200-700 depending on the loan.
3. Lenders mortgage insurance (LMI) is a one-off cost which protects the lender against any loss which may occur if the buyer is unable to pay the loan. This cost is a non-refundable cost which is added to typically home loans with a loan to value ratio above 80%. LMI is calculated based on the size of your deposit and how much is borrowed.
4. Stamp duty is a state and federal governments charged tax for certain documents and transactions. The cost of stamp duty varies according state in which the transaction takes place and the property value.
5. Legal fees are often required for actions such as the property ownership transfer.
Ongoing Property Costs:
6. Loan repayments are the monthly costs which are required according to the loan arrangement made with the lender. The cost amount depends on the interest rates, type of loan, loan term and the amount borrowed.
7. Land tax refers to the state tax which landowners must pay.
8. Council rates are the costs collected by local governments which pay for maintenance of the council area such as garbage collection, plumbing and electrical services. Council rates are paid either quarterly or annually.
9. Body corporate fees are the costs incurred in shared blocks such as apartments, townhouses and units which account for the costs of maintenance of the common areas. The fee amount is dependent upon the property’s age, condition and the level of maintenance required.
10. Building and contents insurance refers to the cost insurance which covers damage caused by unforeseen natural disasters including fires, flooding or earthquakes. The fee depends on the level of coverage selected.
How We can Help You to Buy a Property
Here at Finance Mutual Australia, we want to make the loan process as smooth as possible for our clients. We are dedicated to finding the right loan for each individual client and their needs.
Contact us today to find out how we can help you with buying a property.
(08) 8216 4111
Please note we do not provide tax, legal or accounting advice. Any information contained in this document is of a general nature only and does not take into account the objectives, financial situation or need of any particular person and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Therefore, before making any decision, you should consider the appropriateness of the information with regard to those matters and consult your own tax, legal and accounting advisors before engaging in or considering the appropriateness of any transaction.