In addition to the Purchase Price of the property you wish to buy there are other costs involved with purchasing a home. These all add up to a significant amount, so should be considered at the outset of your property purchase journey and factored in to your budgeting for this exciting decision.
Here are the main costs that you mustn’t forget about:
- Property Inspection and Due Diligence Costs
Unless the home is brand spanking new, it is usually prudent to have it checked over by suitably qualified professionals to ensure you are not buying a lemon. If problems are discovered, at least you know what you are getting yourself in to, so I believe these up front costs are a wise investment for your long term peace of mind. Examples are a timber pest inspection and a building inspection. Discuss your due diligence concerns with your sales representative and they will help you to decide whether you should have these inspections performed ahead of making an offer, or instead, include special conditions with your offer that entitle you to the benefit of these inspections after your offer has been accepted by the Seller. - Finance Costs
Each bank or lender charges fees for various reasons when setting up a home loan. Make sure you ask your bank or mortgage broker about these charges as it may help you to decide which is the best lander and home loan product for you. If you are borrowing more than 80% of the Purchase Price of the property, then Lenders Mortgage Insurance will apply. This is a one-off cost that is usually added to the loan so you will be effectively paying this cost off over time, as part of your home loan. - Conveyancing Costs
You will need to engage the services of a qualified settlement agent (conveyancer) to make all of the necessary arrangements on your behalf to transfer ownership of the property over to you and to liaise with your lender to ensure that sufficient funds are available for the day of settlement. The Seller will also appoint (and pay for) a Settlement Agent to represent them in the same manner. Real Estate Agents in Albany do not offer this service in-house, however, they can offer recommendations of Settlement Agents who operate locally. These costs depend on the property you are buying so should be discussed directly with the conveyancer of your choosing. - Government Charges & Taxes
The WA Government charges Stamp Duty (like a GST) on all property transfers in the state. There are currently concessions available to First Home Buyers that may mean you don’t have to pay this Duty on top of the Purchase Price of your property. Your mortgage broker or bank will factor Stamp Duty in to your borrowing calculations and your Settlement Agent will ensure the Stamp Duty is paid at Settlement. - Insurance Costs
Don’t forget that you need to insure both your new home, and your contents, from the time of settlement, just in case something unforeseen happens. It is wise to set up a policy with the insurer of your choice well ahead of the settlement date to ensure this doesn’t slip your mind in the craziness of moving house. - Moving Costs
While it is nice to have friends and family to help with your big move, it is well worth considering getting a moving company do the ‘heavy lifting’ for you. In the very least, you may need to allow some money for hiring a truck/trailer to assist, if you are more of a do-it-yourself kind of person. - Utility Connection Fees
Companies such as Synergy (for electricity) and Alinta Gas (for town gas) typically charge account set up fees when you connect these services at your new address. These charges will be added to your first consumption bill from each provider, but when setting these accounts up you can find out what the associated fees will be, so it doesn’t come as such a surprise when you get sent your first lot of bills.
The Settlement Agents take care of your initial outlay for City of Albany rates and Water Corporation service charges. Your settlement statement should detail what periods they have paid up front for you, on your behalf. - Renovations and Repairs
If you can’t move in to your new home without doing some improvements first (such as installing new carpet or painting), don’t forget to add these costs to your budgeting. - Indirect Costs
These are usually only minor, and may be paid for well in advance of you making a property purchase. For example, fees to seek advice from an accountant or financial advisor. Others include more general costs such as that for travel (fuel, upkeep of a vehicle or pubic transport) and of course, your time and energy (not a monetary cost).
You will notice that one expense which is NOT listed above is a fee to your real estate agent. As a home buyer, you are NOT required to pay a sales representative to help you with your purchase. Sellers pays real estate agents a commission to sell their property, but a Buyer does not pay a sales representative to assist in a real estate transaction.
Please note that the information outlined in this article is very general advice and I have not provided specific costs. This is because these expenses usually depend on the size and type of property that you are buying. If you wish to establish the actual dollar value of these costs of buying a property, please contact one of the friendly sales representatives at Merrifield Real Estate and they will be happy to break down each of these fees and charges to assist with budgeting and forward planning.
When buying an investment property as opposed to a home to live in, most of the costs outlined above still apply, so again, you need to factor these in to your budgeting ahead of making a purchase. Before making the decision to buy an investment property I recommend you seek individual advice from an accountant to find out which of the purchasing costs may be tax deductable and how to maximise your benefits.
Happy home buying!
