All You Need to Know About Costs Associated with Buying a Property
The advertised or contract price of property being purchased is only the starting point when it comes to costs associated with a property purchase. Whilst the purchase price is certainly the largest cost you will incur, there are several other expenses that need to be factored into your calculations.
- Stamp Duty
Apart from the actual property itself, stamp duty charges are usually the next most costly item to consider when purchasing a house. In Western Australia, stamp duty is calculated based on the value of the property with the charge being around $15,400 for an average house price of $450,000.
If you are a first home buyer you are exempt from stamp duty charges for purchases $430,000 and below, and benefit from stamp duty concessions for purchases between $430,000 and $530,000 but you will pay full duty beyond this.
- Settlement Agent
To purchase a property, it is recommended to engage the services of a Settlement Agent or Conveyancer to handle the legal paperwork. A Settlement Agent’s role is to make the transaction process smooth and they will ensure you meet all your legal obligations as the purchaser.
Not all settlements are the same so in many cases conveyancing costs may be different, however for a standard purchase in WA you can expect to be charged anywhere from $1,500 in legal fees.
- Government Charges
In addition to stamp duty, you can expect to incur further charges courtesy of the government. Firstly, there will be the Mortgage Registration fee payable which is for Landgate to lodge a new mortgage against the property. Currently in WA this fee is $171. Additionally, a Transfer Fee of $261 to change the property ownership details is applicable.
- Loan Establishment Fees
Depending on the lender and loan product you choose, there is a good chance that there will be an application fee to apply for finance. Loan establishment fees normally are around the $600 mark, but again, this depends what product is being chosen. In some instances, there are no application fees on certain products, but your broker will be able to help you determine if these may be right for you.
- Lender’s Mortgage Insurance
If you have less than a 20% deposit to put towards your property purchase then you will be charged Lender’s Mortgage Insurance (LMI). This is a one-off charge payable by the mortgage holder that covers the lender should the customer no longer be able to honour their debt obligation. The charge is dependent on the size of the loan as well as the loan to value ratio and will often run into the thousands. In most cases LMI is added to the loan amount so it is not considered an upfront out of pocket expense but is certainly a purchase cost none the less.
- Property Inspections
Its standard for a pest or termite inspection to be included as one of the terms of the contract
of sale and this shouldn’t set you back more than about $100 but may vary depending on the property itself and its location. Some purchasers also like to have a building inspection performed, particularly if the property is older than average and may show signs of disrepair. A building inspection is likely to cost around $600.
When considering purchasing a property, its reasonable to suggest that the associated costs may run into the tens of thousands. Your mortgage broker will be able to advise you how these expenses are paid during the process. Contact your Blackburne Mortgage Broker if you are looking to find out what your dream home will potentially be costing you.