As a general guideline, you’ll need at least 5% of the purchase price to cover the upfront fees of your loan. Thus, for a $600,000 house, you’ll need an extra $30,000 (roughly) to ‘close your loan’ properly. We’re talking about stamp duty, legal and conveyancing fees, building and mortgage fees, and lender fees. These must be paid in addition to the house loan deposit, which may surprise some home buyers!
Here's a closer look at the typical upfront charges involved with your house loan:
Stamp duties: Stamp duty is paid to the government and is proportional to the value of your property. Thankfully, certain Australian jurisdictions provide rebates to first-time house buyers, so visit your state’s website for additional information.
Fees for legal and conveyancing services: It is recommended that you have your sale, mortgage, and other legal documentation prepared by a solicitor or conveyancer, who will charge you between $1,000 and $2,500 (or more) depending on the state you are purchasing in and the intricacy of the paperwork.
Lender and mortgage fees: Lenders charge you a range of fees for establishing your loan, such as an application or loan establishment fee. You will also be charged a valuation fee since lenders use an external valuer to evaluate the property you intend to buy to determine how much they want to lend to you.
Lenders Mortgage Insurance (LMI): If you borrow more than 80% of the value of your home, you may be obligated to pay Lenders Mortgage Insurance. If you do not wish to pay the LMI payment upfront, you can include it in your final loan amount.
Fees for Exit/Deed Release: Many mortgage lenders add exit fees to discourage people from remortgaging and offset their administrative costs. These usually apply if you close your house loan before the end of the term.
Home insurance: Although it is not often required by law to get home insurance to protect a property you are purchasing, lenders may insist that the borrower obtain home insurance as additional security on the loan. Ask your lender about their insurance requirements since this may be necessary from the moment you sign the contract.
FAQs
Got questions? Find answers to some of the most commonly asked questions about our financial solutions, processes, and services to help you make informed decisions.
LMI is a third-party insurance premium payable by you as the borrower, to protect the lender against the potential loss of money if the borrower is unable to repay the home loan. Generally, an application with a Loan-to-Value Ratio (LVR) of 80% or more may result in the borrower having to pay Lender’s Mortgage Insurance.
Extra payment is an excellent feature of a good mortgage deal. Here, your lender lets you make lump-sum additional payments along with your regular monthly payment. Making extra payments allows you to shorten the length of time you are paying your mortgage. Since your balance is being paid off faster, you will also have fewer total payments to make, thus lowering your interest. At Reliiance Financial Solutions, we can help you find the most suitable mortgage deal for you. We have a range of lenders that allow you to make as many extra repayments as you want, whenever you want, without attracting any penalties.
Stamp Duty is a government tax imposed on contracts, with the amount usually calculated as a percentage of the contract value. In layman’s terms, it is the tax charged for your legal documents to be ‘stamped’.
If you are planning to buy a property, it’s crucial to factor your State’s Stamp Duty into your budget.Chances are, based on your circumstances and state of domicile, you might be able to obtain a stamp duty exemption, or concessions (discount) against the purchase of your first home. Stamp duty laws get changed often, so be sure to check your State Government’s website for the most up-to-date information.
Did you know that some lenders would allow you to cash out any extra repayment you made whenever you need the money? You read that right. This useful mortgage feature is called “redraw facility”. You can withdraw any extra repayments or lump sum payments you make over the life of the loan. At Reliiance Financial Solutions, we will explain all mortgage products to you, including those which allow you to the redraw option.
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