Let’s be clear – we do not charge you for any of our services however, lots of other people do
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.
LMI ( lender’s mortgage insurance)
A good example of tiered charging 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 .
Lender’s Establishment Costs
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 their legal and valuation costs – tricky isn’t it.
As a general rule any loan with an annual fee (typically $300 – $400) does not have any establishment costs. Very few loans actually cost nothing to get into – however there are special offers and potential fee waivers that can be negotiated. Quite a few lenders are offering $750 to $1,500 in cash rebate and when you add that to our rebate these could be very attractive options.
Valuation costs can vary from free to over $1,000 depending on the property and the lender. Valuations are often included in loan establishment fees but not always. Even when they are included it is often up to a specific amount such as $250 and you may be charged for any additional costs. Valuations in small country towns, islands or out of the locations can be more expensive due to valuers travel costs.
If you have more than one property you may be charged valuation costs and legal costs for each additional security – typically $300 each.
Costs Associated with a Guarantor
Using a guarantor can add significantly since they must also be included in the contracts, their property will require a valuation and a new or second mortgage will be taken over the guarantors property further adding to the costs. It is important to choose the best lender for your and your guarantors individual needs when considering a home loan with a guarantor.
Stamp duty is a State Government imposed tax and is different in each state. There may be stamp duty concession for first home buyers although in most states these only apply for new home buyers and even so are capped at different property prices. The range in stamp duty is very wide for example 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.
If you are relying on “new home buyer” incentives beware as these incentives often push up the entry price of the new home. It is not uncommon for the value on these properties to stall or even fall over the first year or two.
Other Costs related to Mortgages
In addition to all of the above you will then be up for your own legal fees for a solicitor or conveyancer and/or 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 are looking at borrowing 95% + LMI… rather than the 90% many people think.