Whether you are a first home buyer, investor or looking to purchase your second home, you may not be 100% sure exactly how much you will need to contribute towards the purchase.
While the deposit will be one of your biggest initial costs, there are a number of other expenses you will need to include in your calculations like stamp duty, solicitors costs, lender's mortgage insurance to name a few.
This is probably the easiest part to calculate. Do you have enough funds to contribute 20% and avoid mortgage insurance or will the amount you borrow be above this meaning that mortgage insurance will be added to the loan? On a $450,000 purchase, multiply by .20% for a 20% deposit, $90,000. If this is out of your league then multiply by .10% for a 10% deposit, $45,000. The absolute minimum most lenders will accept is a 5% deposit, multiply by .05%, $22,500.
Stamp duty varies from state to state and there are plenty of easy to use calculators online to assist. The stamp duty amount is based on the market value of the property or the purchase, whichever is higher. The amount will also vary depending on whether the property is an investment, established, newly constructed, vacant land and whether you are a first home buyer or not.
Lender's Mortgage Insurance
Lenders mortgage insurance (LMI) is a one off expense and has a purpose of protecting the lender in the event that you default on your mortgage. The majority of the time it is added to the loan so you don’t need to factor it in to your deposit amount. Just be aware that it can’t be added to the loan if it pushes the loan amount above the maximum that the lender will lend to. For some lenders it will be 95% or 97% of the purchase price while others will add it without restriction. Check with lenders to determine where your loan fits.
Although you may not need to factor it into your deposit, remember that mortgage insurance can add to thousands of dollars and each lender will have a different figure. Ensure your discussions with lenders include estimates of the mortgage insurance cost so you know what you will be charged.
While you are able to act on behalf of yourself when buying a property, the process can often be complicated and there are a number of legal issues that you will need to deal with. Solicitors or conveyancers are experts in this area and can help the process run smoothly and handle all the legal requirements. Fees will vary depending on the amount of work they do, but they can be around $2,500.
Pest & Building Inspections
These help ensure that there isn’t anything seriously wrong with the property that you are unaware of. Your solicitor or conveyancer will often advise that you get a report prior to exchanging unconditionally on the purchase. These can add to anything up to $1,000.
Adjustments at settlement
Your solicitor will calculate adjustments for things that the current owner has paid for that relate to the period when you own the property. Adjustments for council rates, water rates, strata fees etc are the most common.
The most important thing when it comes to purchasing a property is to have good advice from a team experts. Having a lender, solicitor and a builder that can help guide you through the process can be invaluable. When you are weighing up who you will choose, make sure you include in the criteria if they are approachable and are willing to provide ongoing support.
When it comes to advice around purchasing, crunching the numbers and choosing a home loan, we can help. You can find out what is on offer from the range of home loans that State Custodians offers as well as 25+ lenders on their lending panel. Experienced Lending Specialists work hard to give you the information you need as well as guide you through the process. Call on 13 72 62, or leave your details here and they will contact you.