What are the real costs of your home loan

Unfortunately this is not an easy question to answer as some of the most significant costs are based as percentages or tiered on the loan amount. A good example is LMI (lenders mortgage insurance) which applies to all standard home loans where you are borrowing more than 80% of the value (LVR) and 60% on low doc home loans. If you look at the table below which shows fairly typical rates note: there are two main insurers and they can vary from one lender to another and from time to time. this table is not intended as a mortgage insurance calculator it is just an extract to give you an idea, the actual rate increases at each percentage point so 85% has a higher premium than 84%

As you can see your loan amount only has to slip $1 over into the next tier to make a big change in the costs eg: a $499,000 loan at 90% LVR will cost you $7984 while a $501,000 loan at the same LVR could cost $11,784 .

Many lenders have flat establishment costs, these are intended to cover most of their standard costs such a their own lawyers, documentation fees, valuers costs etc. While some lenders advertise "no application fees" but charge you legal and valuation costs - tricky isn't it.

If you have more than one property you may be charged additional valuation costs and legal costs. Using a guarantor can add significantly since they must also be included in the legal documents etc. Then there is stamp duty which is different in every state and then there are stamp duty rebates for first home buyers but these are capped at different property prices or in Queensland owner occupiers pay much less than investors. Off the plan properties often have low stamp duty because you enter into the contract before construction when the value of the unimproved land is is lower.

In addition to all of this you will then be up for your own legal fees for a solicitor or conveyancer and settlement representation, home insurance is a condition of the mortgage and of course you have to move your furniture and pay to have utilities such as power, telephone and gas connected. If the vendor has paid council rates in advance you will probably be required to reimburse the pro rata share of this. As a rule of thumb if you are unlucky enough to live in a state where stamp duty applies we suggest you allow 5% of the purchase price and if you need LMI then ask if your LMI can be capitalised (added onto the loan balance).

Finally the most important thing to realise is that 'oncosts' are required in addition to your deposit. So as you can see if you have saved 10% of the purchase price and you can't get first home buyers assistance then at least 5% will go in costs and you looking at borrowing 95% + LMI... rather than the 90% many people think.