Costs of owning a house

Buying a home is more than just saving for the deposit. There are many costs and factors that influence the process of buying and owning a home. To prepare you for home ownership or a home loan, we have compiled a list of all the possible expenses you should expect.

Buying a home involves an initial financial outlay, but not everyone knows how long this docket will run for. Even though state and federal governments continuously hand out different incentives, it doesn't wholly imply that you won't need to get ready for some of the external costs involved.

The best thing is to perform an extensive analysis before you buy your home. There are two types of costs that homebuyers incur, and these are upfront costs and ongoing costs. Keep reading to find out more.

Upfront Costs Of Buying A House

Homeownership is an outstanding achievement, but it's best to know what's involved. Here are the upfront costs of owning a house that you should know of:

Lenders mortgage insurance

Lenders mostly charge the Lenders Mortgage Insurance (LMI) in cases where the buyer borrows more than 80% of the property's value. It is basically what the borrower will pay, which offers protection for the lender, especially in cases where the borrower cannot repay the loan.

The main thing to note about the cost of the Lenders Mortgage Insurance is that there are variations in the price. These variations mainly depend on the size of your deposit and the insurance provider. Today, there are different tools with which you can get an estimate, so you can try using one of these tools.

Legal and conveyancing fees

The cost of hiring a conveyancer or a solicitor is another vital aspect to note, especially when buying a property. Even though there are different options and DIY conveyancer kits online today, it's important to note that they don't completely replace the actual thing. Basically, a conveyancer or solicitor will help you prepare the required documents.

They will handle everything between the vendor you're buying the property from and your bank. In addition, there are cost implications associated with mortgage transfers and registering the land. You might wonder if there's any difference between a conveyancer and a solicitor.

The main difference lies in their expertise and the prices of the services that they provide. Basically, a conveyancer primarily handles the processes involved in preparing legal documents and giving advice concerning property transactions. On the other hand, the solicitor offers a range of legal advice.

Building and pest inspections

Another vital recommendation is to perform building and pest inspections. This is vital for houses and separate dwellings. There's also a need for strata report inspections which are for strata dwellings and units as well.

The importance of the report from these inspections is that they will give you an idea about the structural integrity of the building. You'll also get to know if there is any problem that will cost you a lot to fix in the future.

Strata inspection is also vital because the report will help you identify the type of work that has been done on the property. You'll also get to know if there are future work plans.

Stamp duty

This is also called transfer duty, and it's a considerable expense that you cannot ignore. Many people complain about the stamp duty when buying a property because of the burden it brings.

It's worth mentioning that the cost of stamp duty is different for each state. This also applies to the territory and state stamp duty concessions, especially for new home buyers.

For example, in New South Wales, the stamp duty cost for an ancestral home worth $800,000, is $31,000. It's worth noting that not every lender will provide the option to capitalise this cost in the home loan. Therefore, you'll also need to get ready to pay this upfront.

Buyer's agent

Having a buyer's agent is not compulsory, but if you plan to buy a home, it's a cost you'll need to consider. Basically, the buyer's agent will handle different tasks, including helping you find, negotiate, and complete the property purchase according to your preferences.

The main benefit of working with a buyer's agent is that they have all the contacts and research tools to help track down your ideal home. They can achieve this within a window of 45 to 60 days. With homebuyers, this can take as long as six months.

Buyer's agents generally can go through a broader range of properties, even those not yet on the market.

Removalist costs

To reduce the stress on your part, you'll also need to hire a professional removalist service. You can save additional costs by hiring a truck or trailer to help move your home items.

Home loan fees

After your home loan, there are many other loan fees that you'll need to pay upfront. To avoid unnecessary expenses and hidden charges, it's best to use transparent lenders with their costs. Also, it's worth noting that the prices aren't the same for every lender, and in most cases, these fees will leave you shocked.

Another thing to note is that the lenders can call the fees by different names, depending on what suits them. Some can call settlement fees the lender's legal fees, and others call application fees the establishment fees. It's crucial to know what each fee stands for and the different names they are called.

It's a lot more complicated than you could imagine because many vendors also include settlement fees, valuation fees, and document preparation fees in their application fees. All these complications only confuse matters for borrowers, and it further makes it hard to budget appropriately.

Different home loan fees

Going through the terms and conditions of the home loan contract will help you understand everything better. Here are some of the home loan fees to note:

• Loan establishment fee: This is a cost you pay to establish your loan. Some brokers call it an application fee, and sometimes it covers bank legal fees, settlement attendance fees, and valuation fees. 
• Valuation fee/security assessment fee: For the lender to determine the amount they can lend you, they will hire an external valuer to assess the property you want to buy.
• Security guarantee fee: You'll be charged for this if there's security on the home loan.
• Rate lock fee: Paying this fee will lock your rate, and you won't need to pay for increases after your first repayment.
• Document preparation fee: This is a fee that many lenders charge for preparing home loan documents even before approving the contract.

Ongoing Costs Of Buying A House

In addition to the upfront costs, it's also vital to understand the ongoing costs involved in home ownership.

Council rates

After buying a property, you are responsible for paying the vendor the remaining quarterly or yearly rate, like land and water. This usually starts on the day of the settlement, and it solely depends on the area.

Strata and body corporate

The strata or body corporate fees are also required after you purchase an apartment, townhouse, or unit. This is for maintenance, especially for shared areas on the property, admin fees used in running the strata/body corporate management, and building insurance. It's important to note that the building insurance only covers the building (as the name implies). 

Regular maintenance and repairs

It doesn't end with buying a property and moving into the property. You also need to have a budget for regular maintenance and repair works on the property you buy.

Everyone hopes to buy a property that won't require maintenance all the time. While it's not expected that repairs are frequent, it's best to be ready for these repairs because they can be expensive.

Maintenance varies but primarily includes:

• Cleaning out the gutters.
• Gardening.
• Painting the property.
• Getting air conditioners serviced.

On the other hand, repairs cover air condition repairs, replacement of broken water systems, repairing screen doors, and fixing leaking laundry machines.

Home and contents insurance

Most lenders will require you to take out building insurance before you get the loan. Also, the time it takes to sort your building insurance differs for every territory and state. It also depends on the contract you signed.

In general, you'll need to have the building insurance the day you sign the sales contract or after settlement. In addition, you also need to take out the contents insurance. This covers everything on the property, including electronics and furniture.

Factors To Consider When Buying A House

In addition to understanding the costs of buying a house, it's also essential to know the factors to look out for. As mentioned earlier, buying a house is one of the best financial decisions you'll make. After deciding that you want to buy a house, you'll need to know the key things to take into consideration. 

Here are some of the most important things to consider when buying a house:

Location

Choosing an excellent location will always be a great asset, irrespective of future market fluctuations. An ugly house can appear attractive when located in a great place. However, it's almost impossible to make a lousy location great. 

The main things that make a location great include its proximity to basic amenities and transportation within the region. These are all factors to consider when choosing a location. Another thing to have in mind is the PO boxes, which are vital for both personal and business uses. 

Neighbourhood

Like location, the neighbourhood where the property is located is also a critical factor you should consider when buying a house. You must inspect the area before you make any payments for the property. An important question to ask when reviewing the neighbourhood is whether they are family-friendly or not.

Another thing to ensure is that you check the neighbourhood during the day and at night. You should also consider meeting some of the neighbourhood's inhabitants to obtain as much information as possible. Nobody will want to live in an area filled with crime and terror. Therefore, it's best to check all these things before you buy a house. 

Schools and colleges

If you're a parent, you'll need to check the regional schools and colleges before buying the house. It pays to buy a house close to good schools and colleges so that your kids can have the best form of education. 

In most cases, houses that are near schools and colleges tend to be expensive. However, the upside here is that you can earn much more because they have high resale value. It's also much easier to rent houses within this region. 

Infrastructure

Accessibility to basic infrastructure is also an essential thing to consider when buying a house. Before making any payment for the home, it's best to know the different infrastructures available in the region. Some of the factors you need to ask about include the following:

• The availability of water in the area.
• Connection to train or roadway networks.
• Presence of amenities like telephone, internet connectivity, recreational parks, and street lighting.

Crime

One of the primary things you should look out for when checking the neighbourhood is the crime rate. It's a lot easier to get this information online. Today, there are different websites where you can get essential information about crimes within the region where you want to buy your property. This will make it easier for you to actually feel what it's like to be in the neighbourhood.

You might also want to consider options like talking to people in the neighbourhood and assessing the area's general appearance. You should stay committed to ensuring that you do not end up investing in a neighbourhood filled with crime. 

House inspection

This is a compulsory activity to do before you pay for the house. While doing this, you need to have it in mind that real estate agents will always do their best to make the property appear as good as possible.

With that, you may not be able to easily identify any flaws in the property. While performing a house inspection, it's essential to know what to look for. Some of the critical things include renovations, repairs, and maintenance details, and it's important to do this before you sign any document.

The best option is to get professional building inspection services as you may not be able to notice anything important on your own. Always remember that renovations and fixing cracks are expensive, and you'll need to make vital calculations before you buy the house.

Green open space

This is a common desire for many homeowners, and it's not strange to see people look out for the available green space on their property. Before you buy the property, it's important to consider the green open space.

Checking the green open space is easy. You only need to walk around the locale to check its surroundings, landscape, other homes, and even trees. This is a great feature that will determine whether the environment suits you or not.

Always place more importance on the location of the property before you buy it, and this should also apply to its environment. Topography is equally a vital thing to have in mind, as well as the drainage systems available.

Basically, you need to do everything meticulously when buying a house so that you don't make costly mistakes.

Planned expenditure

The home you buy can turn into your castle, and you'll be able to do anything to it, provided you don't violate any laws. New features, extensions, and renovations all add to the property's footprint and the value of the home, but this can be expensive.

Years after buying the property, it will start to look dated and tired, and you may need to invest in maintenance to preserve the value of the property. Renovations generally cover complete redecoration, creating extra space, and new installations. For this, you'll need to have a budget, and it's part of the ongoing expenses mentioned earlier.

On the other hand, remodelling occurs in cases where you'll need to change the layout of your home. This includes creating extra bedroom space or even creating space in your living room. Unlike renovations, remodelling consumes more money, and many people get concerned about getting their money back.

Get Professional Home Inspections Before Buying

When you buy a house, it's imperative to consider all the factors above and ensure that the house is in good shape. By doing that, you can be sure that there won't be a need for remodelling or renovations, even after a while.

Also, it's important to keep in mind the upfront costs of securing a loan and ongoing costs after buying the house. However, the need to have a pre-purchase building inspection done when buying a home cannot be overemphasised.

This will save you a lot of stress in the future as these professionals will be able to identify any underlying issues with the property that are not obvious to untrained eyes.