22 July, 2014 / Category: Blog
Whether they’re hidden, upfront or upside down, it doesn’t seem to matter: even the faintest whiff of a fee can send all sorts of shivers down your spine. Amidst all the fine print in our lives, perhaps fees have become synonymous with all things unprecedented and secretive, where in fact many will be a reflection of the quality of the services you enlist and company you keep in your real estate transaction -which can, of course, make all the difference.
So, while it might be a bit cheeky to suggest you embrace the bevy of fees associated with buying property, there is a real sense of empowerment to be found in equipping yourself with the best professional services out there, not to mention the knowledge of exactly what lies ahead as you embark on your buyer’s crusade. Just what you encounter along the way will of course depend on the nature and location of the property you’re buying, but most of us can expect to draw swords to the following fees:
A discretionary (yet often recommended) pre-purchase building or pest inspection will usually cost between $550 to $990.
Time of purchase
Infolio recommends taking out insurance as soon as you ring through your purchase. You’re looking at anything from $500 to $2000 to protect one of life’s biggest investments.
If you’ve enlisted the services of a buyer’s advocate to facilitate your purchase (a very wise choice), their varying set or sale percentage-based fees are payable once the purchase is secured, rather than at settlement stage.
Loan application stage
A few banks out there will charge the following fees (although if you play your cards right, they might not):
Loan Settlement Stage
At the loan settlement stage of your buyer’s journey, you’re likely to come across the necessary evils of state government stamp duty, registration of transfer and registration of mortgage costs. These will normally amount to the biggest fees in your transaction.
The approximate costs on a hypothetical $500,000 house purchase vary from state to state, with Victoria proving to be the highest on average:
In Victoria, a $500,000 house purchase will cost you $21,790 in stamp duty, $1,365 in registration of transfer fees, and $111 in registration of mortgage fees. Conversely, it’s looking rather sunny in Queensland. A $500,000 purchase up north will cost you a mere $8,750 in stamp duty, $1,148 in registration of transfer, and $162 in registration of mortgage fees.
A common cost for the first-home buyers, investors or leverage hunters amongst us that of mortgage insurance, which insures your lender from potential risk. This is payable when you lend in excess of 80% of the loan to value ratio. For example, taking out a $400k loan to purchase a $500k property is equal to 80%, whereas those who loan a little more, say $450k, to purchase the same property, would up it to 90%, stepping well and truly into mortgage insurance territory. The premiums for the greater risk are payable by you (normally added to the loan), and differ from lender to lender and also from state to state. In our 90% ratio above with our $450k loan, the premium would be between $8,400 and $9,800.
At settlement, you will also have to pay the balance of any land and water rates in the current period. These are called adjustments, and depending on the time of the year and the price of property, can range from a couple of hundred to thousands of dollars.
You also have solicitors/conveyancers fees, which generally range from $770 to $1650, depending on the transaction.
If you sell the property or are refinancing, the only other fee you might have to look forward to is at the discharge of your loan/mortgage. While deferred establishment fees are abolished, most lenders will charge you between $250 and $500 to arrange the settlement.
It would seem that fees truly make the world go ‘round. But all romance aside, the little costs associated with buying do add up, presenting a challenge to new or inexperienced buyers in particular. So, be sure to take a deep breath before you take the plunge, or better yet, get in touch with Infolio to map out your buyer’s journey today.
Managing Director Intuitive Finance