Buying a home is an exciting time – you’ve saved your deposit, you’ve worked out your budget and you’re ready to start looking at properties. Before you rush out and make an offer, make sure you educate yourself on all the costs involved, including government charges, legal costs and home loan fees. A bit of preparation ahead of time can help you avoid any unexpected surprises later on!
When you first take out a home loan, you will need to pay some upfront fees and charges. These are to cover legal services, government charges and setting up your home loan. While they can add up, the good news is you only have to pay them once.
Property buying costs
- Legal fees – $400+. A home loan contract is a legal document and needs to be prepared by a lawyer or solicitor.
- Stamp duty – variable, depending on your location and circumstances. Stamp duty is payable on all property purchases – the amount will vary depending on your state, whether you’re eligible for a concession and how much your property is worth.
- Conveyancing costs – $700-$2,500. Conveyancers look after the legal process of your property transfer and help make sure all documents are complete and correct.
- Valuation fees – $200-$700+. Before your home loan can be approved, your lender will need to know how much your property is worth. Valuation fees depend on the type of valuation you get. Some lenders will waive the valuation fee up to a certain property value. For example, Bluestone offers free valuations up to $2,000,000.
- Building and pest inspections– $300-$400. Before you buy your new property, you’ll need to get a number of inspections to make sure the building is sound and pest-free.
One-off home loan fees
- Loan establishment/application fee – $500-$1000. The loan application fee covers the cost involved in preparing the documentation for your new home loan. Some lenders offer discounts or promotions where the fee may be waived for a period of time.
- Mortgage registration fee – $145-$187. This is a government charge that varies from state to state.
- Lenders’ mortgage insurance (LMI) – variable. Some lenders charge an extra fee if your deposit is less than 20% of the value of your home. LMI can potentially add up to thousands of dollars in additional fees. You can avoid this by looking for a lender – like Bluestone – that doesn’t charge LMI.
- Settlement fee – $100-$1000. There’s additional work involved in settling your home loan, and you’ll usually be charged for this. Fees can vary so it pays to look around. For example, at Bluestone we only charge a $120 settlement fee.
- Discharge fee – $350-$500. Fees aren’t just charged at the start of your loan. If you pay your home loan off because you’ve made all your repayments or you’ve decided to refinance, you’ll need to pay a discharge fee. This covers the cost of the paperwork involved in closing off your mortgage and changing the title of the property.
- Break fee – variable. If you’re on a fixed rate home loan and you decide to leave before the end of the fixed rate term, you may need to pay a break cost. Break fees depend on market conditions and how the interest rate has changed since you took out your home loan.
Ongoing home loan fees
You may have some ongoing fees and charges to factor into your budget, depending on your type of loan and lender. The main ones are:
- Redraw fees – up to $50 per redraw. If your lender offers a redraw facility you may be charged a fee whenever you make a redraw.
- Offset fees – variable. Some lenders charge a monthly fee for an offset facility, although not all do – at Bluestone our offset facility is fee free.
- Service fees – $5-$15. Usually charged monthly, service fees cover the cost of servicing your loan and regular administration.
Should you roll your fees into your loan?
If you’re daunted by the idea of paying all your fees upfront, you may be able to roll some of them into the overall cost of your home loan – known as capitalisation. This may reduce your immediate expenses but it will add to the size of your loan and you’ll end up paying interest on the extra amount. It’s a good idea to get professional advice if you’re thinking about capitalising your home loan fees.
When it comes to home loan fees and charges, there’s a great deal of variation between different lenders and products. It’s always worth doing your research and speaking to your lender so you can budget for all the costs involved and avoid any surprises.
Want to know more about Bluestone’s range of home loans? Call us on 1300 608 658 or find your fit to see which one of our loans could be right for you.