Costs of Securing Your Home Loan

Interview with Loan Solution Expert: Don Farquharson

"The first step to saving for your new home is knowing how much you need to save."

Q: How much do I need to pay for the deposit on my home loan?

A: As a general rule the minimum deposit that lenders like to see is 5% of the total purchase price, but this number can vary depending on the lender and also on whether you need to take out LMI. 

Q: What is LMI?

A: LMI stands for Lenders Mortgage Insurance.

Generally when your deposit is less than 20% of the purchase price you will need to pay LMI. 

This insurance exists to compensate the bank in any situation where they make a loss on your loan.

The cost of LMI varies from lender to lender. It is usually added on top of the loan amount, and in some cases this will mean you need to save more to account for a new loan total. In other cases your 5% deposit will be sufficient and the LMI cost will be factored into your repayments. Remember LMI costs can be avoided if you use a family guarantor. 

Q: What is a family guarantor?

A: If you have a parent or parents with sufficient equity in their home  to cover 20% of the purchase price of your property you can avoid paying LMI or even be able to pay a deposit less than 5%. 

But on top of your deposit and LMI there are also upfront costs you need to consider.

Q: What are the up-front costs of securing a home loan?

A: When you are taking out a home loan you will need to take into account a range of fees and costs. The total costs vary on a wide range of factors and can differ significantly depending on your circumstances. In most cases for home purchases the fees that you will incur will be:

1.     Transfer Stamp Duty:

This can be quite a significant cost. In some cases this might be thousands of dollars, depending upon the purchase price, and which state you are buying in.  

Obviously this is very daunting for home buyers, but not everyone has to pay!

Luckily if you are a first home buyer in Queensland, buying a home under $500,000, you won’t have to pay stamp duty. You may even be eligible for a cash contribution from the government of up to $15,000!

2.     Solicitor Fees:

The services of a solicitor are optional to complete the purchase of your new home, however we strongly recommend that all of our clients take this step as it ensures that there aren't any legal issues surrounding the purchase of your new home. 

This may cost between $1,100 and $1,500.

3.     Transfer Fee:

To receive the title deeds and become the new owner of the property you will need to pay a transfer of ownership fee to the Department of Natural Resources and Mines. 

This cost also varies depending upon the purchase price. 

4.     Bank Settlement Fee:

Finally when your loan is approved and settled most lenders will charge you a settlement fee.

Depending on the lender, this can range from $200-$750.

 5.  Building and Pest Inspection Cost:

We recommend our clients engage professional property inspectors to ensure that the home that they are buying is free from termites and other pests, as well as making sure that your new home is structurally sound. This cost can vary between $250 and $650.

Total Cost:

In total as a first home buyer in Queensland your total fees can be as low as $2,500, however this number will differ significantly depending on your specific circumstances.

Q: How to get started?

A: If you are trying to begin your budgeting process and you want a more accurate savings target get in touch with All About Loans so that we can give you a specific estimate for your deposit and fees. We can give you tips on budgeting and choosing the right property as well.

Remember our advice is free! So pick up the phone and take the first step toward your new home!

Call 0732525208

Don Farquharson,

Loan Solution Expert

Owner & Principal Lender of All About Loans

Photo Credit: https://www.flickr.com/photos/pictures-of-money/