Mortgage Fees and Other Costs

Mortgage Fees and Other Costs

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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.

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