Home loans decoded: The hidden costs of buying a house

When getting ready to apply for a home loan, there are additional costs that some people may not know about that can add up very quickly.

Many buyers think they only require a minimum of 5 per cent of the total purchase price when applying for a home loan. This is forgetting that the lender’s mortgage insurance (LMI) premium is included in the loan amount. LMI applies when you borrow more than 80 per cent of the purchase price, and the premium protects the bank or lender in the event that the borrower defaults.

Stamp duty is also a consideration, though first home buyers are often exempted, or will receive a concession, if purchasing property under a certain dollar amount. This one-off government fee is required to be paid in full at the time of settlement, rather than being paid off like a mortgage. This can add a significant upfront cost that you may not initially anticipate!

For a better idea of the kind of stamp duty you may wind up paying in your property price range, have a look at our on-site finance calculator.

Other costs when buying a home include:

• Conveyancing and legal fees
• Bank and government fees
• Loan application fee
• Moving costs
• Building and pest inspection

If you are buying an apartment, unit or townhouse, it’s important to ask the real estate agent about body corporate or strata fees that will be charged throughout the year for upkeep of common areas. The more facilities your building has, such as swimming pools and gyms, the higher this cost will be.

Other costs for apartments, units and townhouses include:

• Electricity, gas and water bills
• Repairs
• Council rates
• Home & contents insurance

How much could you wind up paying in additional costs? It depends on the purchase price, and for ongoing costs it depends on the type of property. To find out how the costs attached to your specific property aspirations weigh up, use the Duo Finance calculator.

For guidance on buying your home and what to budget for, contact Duo Finance today.