While getting pre-approved sure is exciting stuff, there’s no bigger buzzkill than forgetting to budget for the home loan fees that come with a mortgage.
With the ever-rising cost of living, saving for a home loan in this day and age can be tough – so it comes as no surprise that once a buyer finally gets their hands on a pre-approval, it’s something worth celebrating. Many, however, fall into the trap of forgetting about all of the other non-negotiables involved with buying a house, so it’s important to set aside an area of your budget for home loan fees in order to avoid any nasty surprises.
While some of these fees (like stamp duty) seem like the obvious ones, as with everything in the world of finance: the devil is in the details. Even real estate veterans onto their third or fourth investment property can easily forget about insurance and even body corporate fees, which can all quickly add up – so what do upcoming homeowners need to account for?
Breaking Down Home Loan Fees
Whether you’re a first home buyer or making the moves to get an investment property, there are generally a few non negotiables to account for when it comes to home loan fees. While many are required to be paid up front, there are also a medley of other ongoing fees on top of your weekly, fortnightly or monthly mortgage repayment.
When it comes to accounting for upfront home loan fees (which need to be paid before you can get your hands on the keys) a few of the major ones include the following –
Lenders Mortgage Insurance – If you haven’t saved the full 20% deposit for your loan, then LMI is a necessary evil. This fee is compulsory and is designed to protect the banks if you were to default on the loan. Calculated on a sliding scale, an example of this is that if you were looking at a property for $500,000 with a 10% deposit ($50,000) – expect your LMI to be $8,000 on top of required loan. While it sounds like a lot, and is usually the first of many home loan fees that makes borrowers shiver, it also helps buyers with as little as 5% to get into the market faster.
Stamp Duty – Another non-negotiable, stamp duty is a state government tax issued on all property purchases in Australia. The good news is that if you are a first home buyer and living in the property in Queensland, expect concessions. The bad news is that if this is your second or third home, expect to pay around $8750 on a $500,000 home in Brisbane. This dollar amount depends on the property’s value, so it can fluctuate. However, some states offer a reduced rate on newly built homes, regardless of whether you’re buying your first home or your fifteenth.
Government Fees – This one is essentially all about registering with the Queensland Government. The three major ones include Registration Of Mortgage ($187), Registration Of Discharge On Mortgage ($187), and Registration Of Transfer (Property Title). These can range from a few hundred dollars to a few thousand dollars, depending on the value of your property. They also differ greatly depending on your state, and an example of this is Registration Of Transfer fees which from range $137 in the Northern Territory to $2901 in South Australia.
Legal Costs – You’re going to need the assistance of a solicitor, legal professional or conveyancer to make a strata report, conduct title searches, or to review a contract. The latter isn’t an essential requirement in Queensland as we have standardised terms and conditions, with the costs generally ranging between $1000 to $2000 depending on how complex the transaction is. While enlisting the services of a legal professional isn’t a binding requirement, signing a contract of sale without one can land you in hot water should things go south.
Building And Pest Inspections – This is considered to be the big one when it comes to home loan fees, as the inspection can help to spot minor or major structural repairs in the property in question. You need to protect yourself against any potential issues that may be invisible from the outside, along with any hazardous pest or termite infestations. When combined, these are usually between $500-$700 in Queensland. While not a legal requirement, the majority of property owners in Australia conduct these searches prior to settlement.
Bank Fees – Although you might have your application fee waived, there are also other costs to consider like evaluation fees, settlement fees, and legal fees that may be hidden in the fine print. Many lending providers will also charge customers ongoing monthly fees, so be sure to account for those in your new budget once you’re settled into your new property. Unlike Madd Loans, not all mortgage brokers offer a fee free service, so ensure you shop around for the best fit for your circumstances.
RealEstate.com.au estimates that when obtaining a mortgage for a $500,000 property in Queensland, it’s not unreasonable to pay between $12,000 to $25,000 in fees on top of your interest rate. The key here is to make sure that you’re aware of the costs that come with any mortgage, to ensure that there are no unexpected surprises.
The above are considered to be the “big” home loan fees to watch out for, but that doesn’t mean that the buck stops there. Be sure to factor in other variables like removalist and moving costs, council water and land rates, body corporate fees, insurance premiums and other ongoing bills that affect just about every home owner in Australia.
Understanding Home Loan Fees With The Professionals
With their entire business built on referrals, the team at Madd Loans have taken the mortgage broking industry by storm. Their overwhelmingly positive feedback has helped them to take out numerous industry awards, including the title of “Queensland’s Broker Of The Year” for four consecutive years. After working with a broad variety of clients in relation their mortgage options, it made sense for the team at Madd to have the capacity to offer a full financial planning service.
As a result, Madd Life came to being in late 2019. Madd clients come from all walks of life, including the self-employed. George and the team are now fully able to support and in turn kickstart all of their client’s financial goals, by giving tangible real world advice and a plan of attack as to how to get there.
If thinking about your financial future strikes a chord with you, then it might be time to speak to a professional. Whether you’re chasing mortgage solutions or a financial fairy godmother, the team at Madd work together as a collective to turn your goals into reality