We all wish it was as simple as walking into a store, saying, “I want that one,” handing over the money, and moving into your new home the next day. But, unfortunately it’s not quite that simple (yet 😉). BUT, it’s not as hard as some people believe and with the right lender and basic knowledge of what’s involved in purchasing a first home, the process will be a lot less stressful.
Here’s a few key things you should be aware of before making that big first home purchase decision:
If you’ve conducted research on buying your first home, we’re almost certain you’ve stumbled across the term ‘stamp duty’. But what does it mean?
Stamp duty is essentially paying tax. Transactions (including buying a property or a car) all require a portion of government tax to be paid. Aside from your house deposit, this is the second most hefty payment you will encounter when buying your first home. The fee changes based on the price of the property – the higher the price, the higher the tax.
It can also alter depending on the area you choose to buy, whether you’re a first-home buyer, if you’re from a foreign country or if the property you want to buy is established, new, an investment or vacant land. Stamp duty is subject to change, so it’s important to be up to date with the latest policy in your state or territory.
You’re probably thinking; if stamp duty is an additional cost that I haven’t budgeted for, can my home loan cover the cost? The answer is yes, but unfortunately you’ll be required to spend a more money, just not thousands, thank goodness! Stamp duty is classified as an upfront cost, which means it can be covered by your home loan and reduce the % of your initial deposit. Due to this, you will need LMI (Lenders Mortgage Insurance) which is another additional cost but not as hefty, but we’re getting to that! Read on…
Lenders Mortgage Insurance:
Generally, this is required when someone is unable to deposit the 20% of money required for their home purchase. It ensures your lender is protected in the case that you don’t have sufficient funds to continue paying your mortgage. Basically, you’re a high risk to your chosen lender because you don’t have stable funds hence why your lender requires protection in the event there’s not enough money.
Mortgage protection insurance:
Where LMI only protects the lender, mortgage protection insurance protects you. Essentially it’s a form of personal insurance and is only used in the case of emergency like losing your job for example.
This alters depending on the state or territory, but it’s the cost associated with changing the title of a property from one name into another.
Mortgage registration fee:
If you’ve continued this far then you must be serious about purchasing your first home but that doesn’t mean you’re not thinking, ‘I don’t have the money for this!’ We have some good news; this is one of the smallest fees you’ll pay! In Tasmania, you can expect to pay around $130, but bare in mind this alters depending on the state or territory.
Conveyancing and legal fees:
Ah, you thought you could escape without the legal fees? Unfortunately not. Contracts and settlements need checking but at least they cover the paperwork for you!
Home, building and contents insurance:
Building insurance is compulsory for anyone who has a mortgage, but it’s worth it because there can be risks associated with building and this ensures any damage in the process is covered.
Although all of these additional costs may seem daunting, it’s important to know of all the costs associated with buying a first home in order to protect yourself and your finances. For further information and guidance in your pursuit to buy your first property, contact us today.