Working out the costs of a first home purchase

Stressful costly surprises can accompany the joy of your first home purchase.

So when considering buying a property, it’s important to draw up a very detailed budget that takes into account all possible costs.

The costs involved in buying can often add up to approximately 10% of the purchase price, so do the sums before leaping into the property market.

Your bank, mortgage broker or lending institution will know the extra costs, so before they run their own checks assessing your financial capability, you’d best do your own thorough assessment of the total outgoings and incomings involved well before submitting an application.

On the plus side, firstly be sure you know the rules and regulations for any entitlement to Federal and State government incentives. Each state differs.

Beware that some grants and stamp duty concessions only apply to recently constructed houses or apartments, rather than established homes, so you will need to make the selection of your purchase acquisition with this in mind.

That State government stamp duty on the transfer of property is typically going to make the biggest dent on your savings.

Then if you’re borrowing more than 80% of the purchase price, you may also need to pay Lender’s Mortgage Insurance (LMI). This often costs several thousand dollars.

There will be other fees and charges involved for simply arranging the home loan such as establishment fees, and settlement fees and maybe even a fixed rate lock fee. Other costs involved with the purchase of the property include legal, valuation, conveyancing and inspection reports for pest, building works or the strata body corporate.

Don't forget the removalist.

And then there are the costs incurred quite soon after purchase such as house and contents insurance, council and water rates and strata fees for units.

Lastly, getting all your rental bond back from your former landlord will be another nice little financial boost, just when you really need it!

Speak to Matthew Clark at RAMS Illawarra about your home loan needs.