You’ve decided you’re ready to take a big step towards independence and move out of your parent’s house and into your own home. But are you financially prepared?
According to a 2013 study by The University of Melbourne, some young Australians are going without food and borrowing money from family and friends in order to survive living out of home. Young women are 7% more likely to skip meals and 14% more likely to ask for money, whereas young men are 9% more likely to miss meals and 12% to ask for financial help.
If you are considering moving out of your parent’s house and purchasing your first home, you will need to have a realistic idea of your ongoing expenses. One of the main costs that is highlighted is the home deposit and although this is a significant expense to save for, it is not the only one. There are several smaller costs that you need to be prepared for in regards to both the home loan and moving out. Listed below are two cost checklists to help you get financially prepared for buying your first home.
Costs for buying a home checklist
• Lender’s fees: Different lenders may or may not have extra fees such as an application fee or annual fee. Make sure you explore any extra charges when you are comparing lenders.
• Lender’s mortgage insurance: If you are planning to borrow more than 80% of the property’s purchase price, you will have to pay Lender’s Mortgage Insurance (LMI) and the more you borrow, the more LMI you will have to pay. This could possibly equate to a few extra thousand dollars.
• Stamp duty: Stamp duty is determined by the state governments, so the amount will vary from state to state. Some states do offer exemptions for first home buyers, so make sure you contact the relevant government to see if you are eligible.
• Inspection fees: Inspection fees are not compulsory; however, it is a good idea to have them done to ensure there are no serious problems with the property. Make sure you check with the inspection company about what they charge as well as what will be included in the report to ensure it is enough information.
• Legal and conveyancing fees: It is a good idea to have a solicitor look over the contract of sale to ensure it is suitable and they can also help you negotiate any terms of sale.
• Ongoing mortgage repayments: Your mortgage will be with you for the next 20-30 years, so you will need to make sure you will be able to afford the repayments before signing the dotted line. The lender will complete their own assessment to ensure you can afford the home loan, but at the same time, you will also need to establish a budget to ensure your debt doesn’t get out of control.
Costs for moving out checklist
• Real estate agent fees: If you have employed the services of a real estate agent to help find you a home, they will also need to be paid a fee.
• Home and contents insurance: This may not seem like a necessary cost, but it doesn’t take long for a property to be destroyed by a natural disaster or for your house to be emptied out by burglars.
• Furniture, appliances and supplies: Even if you can get a few second hand pieces of furniture from friends and families, there are still plenty of supplies you will need to help set up house. Take a look in your parent’s kitchen, laundry and other cupboards to see what type of things they use. There are plenty of cleaning supplies and other day-to-day necessities you will need to save for.
• Utility set up: If you want electricity, phone and other utilities to work when you move in, then you will need to save up for the connection fees.
• Moving costs: Depending on how far you are moving away, you may be able to move house yourself. However, if you are further away, you will need to pay for a removalist which can be upwards of a few hundred dollars. Shop around and obtain quotes from different companies to find the best deal.