Step 3 - Prepare for the real cost of buying

The importance of financial homework

Before you leap into the property market for the first time, make sure you know exactly how much money you’ll have to outlay to get that home. The actual sale price is only part of the story.

There can be substantial expenses associated with buying a home and it’s essential that you draw up a comprehensive list of these to avoid any last-minute surprises or budget blow-outs. Our home loan specialists can help with the list. 

NOTE: Details mentioned here are estimates only, as costs differ between various States and Territories and between home loan providers. Some of the costs involved even depend on the amount you’re borrowing and the price of the intended property.  

Home loan application fees 

Almost all lenders charge a loan application or establishment fee on new home loans, which can be as much as $1,000.  

There may also be home loans that have no application fees, but it’s important to talk to your home loan consultant about what works best for you because home loans with lower upfront fees may have higher ongoing interest rates, or may not have all the features you may need. 

Valuation and lenders’ legal fees 

Your lender is likely to require the property you’re buying to be assessed by a registered valuer to ensure you’re paying a fair and realistic market price. 

This cost can range upwards from about $250 depending on the value of the property and is sometimes incorporated into the total loan application fee.

Some lenders may also charge a separate fee for their legal costs, which could range between $300-$600.  There can be a wide difference between the fees charged by lenders, so you should do your research.

Is debt consolidation a viable option? 

If you’re disciplined with finances, combining personal debts with your mortgage may help you save on monthly repayments. But discipline is the key! 

If you have credit or store card debts, personal loans or car finance, you may be able to combine all or a portion of this debt with your mortgage.  

Debt consolidation can lower the rate of interest payable and your overall monthly loan repayments on any current debt.  

Things to be aware of when consolidating debt 

But remember that while a lower interest rate over a longer borrowing period might mean lower repayments for your current debt, the downside is that over the long-term, it could result in paying more interest. 

If you decide to consolidate debts, increasing the repayment amounts on your new home loan to be equivalent to your home loan repayment plus the repayments you were making on the other debts, should mean those debts are paid off sooner and you should be financially better off, provided you don’t redraw those payments, and you cut up those credit cards.  

You can quickly do the basic sums with our repayment calculator.  

But debt consolidation may not work for all.

If you lack financial discipline, the root cause of your initial debts must be addressed or your spending may spiral out of control.  

If it was lack of discipline and/or financial skills that caused the debt in the first place, you should consider taking drastic action; like cutting up or closing your credit and store cards to minimise or remove temptation. 

Planning a budget 

Just do it! 

When buying your first home it’s essential you make a detailed budget plan of all your expenses to help manage your anticipated financial situation. 

There are plenty of good budget planners online. For most of them, all you need to do is enter amounts and the planner gives a rough guide to your savings and borrowing capabilities. 

It should also indicate the amount of the mortgage you’ll need to borrow in order to buy that home as well as determine whether the required repayments are within your budget. 

If not, it will highlight those expenses you should think about reducing or removing, or highlight that you need to reconsider what you can afford to buy.  

Once finished with the calculations, you can usually save the budget plan to your computer or print out a copy. 

Go back to Step 2 or go to Step 4