State and Federal Government costs
Purchase stamp duty
Property transfer stamp duty is a state government tax
payable by the buyer and is calculated on the price paid for
the property. Because it is a duty for transferring the title of
a property, it will be imposed whether or not the purchase
is financed with a mortgage. First home buyers may be
eligible for significant rebates on stamp duty.
• Property transfer fee
This is a state government charge to register the transfer of
title of the property from one person to another. Some
states and territories may charge a set fee, while others are
on a sliding scale.
• Mortgage stamp duty
In some states, stamp duty is payable on the mortgage,
calculated on the amount of the loan. This is a state government
tax and may vary depending on the state / territory.
• Mortgage registration fee
This is an administrative charge imposed by the Land Titles
Office (or equivalent) in each state / territory for entering
(registering) the lender’s mortgage on to the title record for
the property. The fee differs from state to state and ranges
from around $85 to $125 per registration. The borrower
pays this cost.
Loan Application costs
• Lender’s Mortgage Insurance (LMI)
Lender’s Mortgage Insurance (LMI) insures the lender
against any loss incurred if the borrower defaults and the
net proceeds of an enforced sale of the security property
are insufficient to clear the debt. Note that Lender’s
Mortgage Insurance covers the lender, not the borrower.
LMI may be added to your final home loan amount
(depending on the lender.) It should not be confused with
Mortgage Protection Insurance, which covers the mortgage
repayment for the borrower in the event of death, disability,
illness or involuntary unemployment etc.
• Loan application fee
To start the process of obtaining a loan, the borrower may
have to pay an application or loan establishment fee. The
cost can vary depending on loan type, lender, security and
loan splits. In most cases, the fee includes the cost of the
first valuation. The cost of additional valuations ranges from
$150 - $250. A few lenders may ask for an upfront
payment to cover costs.
Purchase costs
• Conveyancing / solicitors fees
This is the fee charged by the conveyancer or solicitor to
carry out the legal work involved in purchasing real estate.
Be sure to ask about the costs of searches, settlements
and disbursements.
• Pest / building inspections
Prudent home buyers will arrange for inspections of a
prospective property by qualified inspectors before
exchanging contracts. The inspections ensure that the
property is not affected by insect infestations and that it is
structurally sound and complies with building regulations.
The cost of inspections is payable by the property buyer.
Note that lenders may make satisfactory inspections a
condition of loan approval if doubts exist about the
condition of the property.
• Insurance
As a condition of loan settlement, lenders will impose a
condition that all security properties are covered under a
building insurance policy. The amount of the policy
coverage required will be the deemed full insurable value of
the dwelling, which protects the borrower (and the lender’s
interests) in the event that the dwelling is damaged by fire
or some other catastrophe. The insurance policy premium
cost is paid by the borrower and the lender’s full name will
be noted on the policy as mortgagee. Building insurance is
not required for strata-titled properties; in these instances,
the lender will require evidence that the body corporate has
taken a policy for the entire block. In Queensland,
insurance is required from 5.00pm on the day following the
signing of the contract.
Construction costs
• Construction loans
Construction loans normally represent more work for the
lender due to the way they are progressively funded during
the construction period. Some lenders will simply add an
additional construction loan fee, while others will charge a
progress payment fee each time the builder asks for a
payment. On top of this, you may also be charged an
inspection fee for a valuer to inspect the property to ensure
the building is in the state the builder is claiming. A normal
construction would have four to five progress payments
and two inspections.
• Site costs and service connection costs
Check your building contract carefully and, if possible,
make sure it includes fixed site costs and connection of
services. Many people assume site costs are included in
the contract, but this is not always the case. Unexpected
events, such as hitting rock or the need to build retaining
walls, can add thousands to the site costs.
The same applies to the connection of services such as
power, water, and phones. Many providers only allow for
5-10 metres for connection from the street to the house
and will charge extra for distances which exceeds this. The
standard service connection may be fine for a standard
residential block but can be an unexpected cost for a large
rural block.
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