An expert is urging homebuyers to be wary of the hidden costs involved in property transactions, especially amid expectations of a possible rate hike this year.
Aus Property Professionals director Lloyd Edge said a potential rate increase would leave little room for buyers, particularly first-home buyers, to adjust their budgets.
“For those buyers still looking to purchase, they have to be careful not to stretch their budget too much in order to make repayments,” he said.
Mr Edge said one of the most overlooked costs when buying a property is lenders mortgage insurance (LMI), which is typically required when a buyer pays less than 20% of the property’s price as a deposit.
“In the event you have to sell your property or default, and the sale price of your home is not enough to cover the amount you owe on your loan, it pays the balance to the lender,” he said.
“Be aware that it is there to protect your lender, not you.”
Mr Edge said it's important for buyers to be thorough with their lenders about the costs of their home loan.
He said there are instances when buyers are unaware that they are being charged with loan application fees.
“If you aren’t charged this fee, you may be charged higher ongoing fees — always check with your lender before signing any paperwork,” he said.
Legal fees are also one of the costs buyers often forget — Mr Edge said this covers the drafting of the contract of sale (COS), other mortgage documents, and any legal processes involved when buying a property.
“This can cost anywhere between $1,000 to $3,000 depending on the scope of work involved,” he said.
“It is also important to note that there is a difference in qualifications between a conveyancer and solicitor which may result in a difference in fees as well.”
Buyers should also prepare their pockets for building and pest inspection fees.
The cost for a building inspection report can range from $400 to $800 but could go beyond depending on the size of the property and the location.
Mr Edge said building and pest inspection is crucial in any property transaction and should not be overlooked.
“It can give you peace of mind and help you to avoid costly problems later on,” he said.
“If issues do occur you may be able to negotiate further on your purchase price or even rescind the sale if there are major structural problems or termite damage.”
These reports, however, might not be sufficient to ensure that the property is in its best shape.
Mr Edge said that in some cases, specific checks are needed to inspect the property’s plumbing and electrical systems.
Stamp duty, which is a form of state government tax, is also something buyers need to be aware of.
“The dollar amount depends on the value of your property and exemptions may apply for first home buyers – but it can be tens of thousands of dollars,” he said.
Photo by @thomasbormans on Unsplash
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