So the day has come when you are looking at buying your first property.
“Fantastic!” you think to yourself, “I can pick up a city apartment for $350,000! BONZA”
But careful there, the asking price of a property is just one of the many things you need to consider before you sign on the dotted line.
When I bought my first property I didn’t even consider stamp duty or solicitors fee’s and bank charges, I was caught completely unaware by a few thousands of dollars worth of extra expenses… So that you don’t get in the same predicament I did, we’ll look at some of those ‘extra’ costs now..
1. Stamp Duty - Changes from state to state and is dependant upon your status. It’s not a “one size fits all” policy and can add 1.5-4.5% to the price of your property..
There are different rules for First home buyers, Investors and for those buying vacant land. “Zoe, that’s all great, but how much is my stamp duty gonna be?” I hear you cry in unison
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Okay, so lets look at the average apartment in Spring Hill, QLD. The current median price is $347,500 in this area so:
A first home buyer would pay: $1,362.50
An investor would pay: $10,637.50
On the other hand, if you were to buy a block of land for saaay $150,000 and build, your stamp duty would be: $3,975.00, or a grand sum of $0 for a first home buyer. The benefit of buying a block of land and building your maison is that the price of the build has zero stamp duty attached! bargain!
For all the legal mumbo-jumbo on stamp duty visit the Office of State Revenue
Solicitors costs- This is the one place you should never ever be stingy with. Find a Conveyancing Solicitor and interview them the same way you would your accountant or agent. Find someone who has a GOOD REPUTATION, this is so important I can’t stress it enough. Please, do yourself a favour and don’t use a low cost, high volume solicitor because they have a tendency to stuff things up. I’m not saying this happens to every contract, but with the market the way it is, errors cost. Let me share another story with you….
Just a few months ago I sold a block of land to a lovely lady who was planning to build an investment property, she was experienced with buying and selling but didn’t have a regular solicitor, she ended up ignoring my referral and using someone near her home. To cut a long story short, when finance was due to be approved, the solicitor didn’t notify that finance was available, and requested a 2 week extension, another 2 weeks later, another extension.
In the meantime I spoke to Ms Buyer and she told me that finance was approved and she was waiting to settle, she had been trying to call the solicitor to tell him this but he wasn’t taking her calls, or he was in court or some other excuse. When she finally did get in touch with him he was rude and basically told her to get lost. Meanwhile, the vendor approved a 2 week extension on the settlement and as the date grew closer we still didn’t have any contact from her solicitor. At this stage the vendor realised that the block had considerably increased in value and he wanted out of the contract so he could sell it for more cash!
Settlement was on a Friday, at about 2pm. The solicitor was supposed to have couriered or overnighted the documents to the vendors solicitor… They didn’t arrive.. We missed settlement due to an incompetent Solicitor.
By a stroke of fortune the vendor gave the buyer another day to get everything sorted out, and literally down to the wire the documents arrived on Monday afternoon.
All this drama could have been avoided if she had used a recommended solicitor.
Anyways, a Solicitor worth their salt with cost around $1000-1200 including searches.
Building & Pest - It pays to get a building & pest inspection, budget around $300 and be sure to read it cover to cover!
Insurance - As soon as the contract is accepted the property is your responsibility. If it burns down before settlement you are still legally obligated to purchase it. So insure it to the hilt! Most companies offer a cover note or something to that effect. I insure my properties with AAMI because i’ve always found them to be helpful and friendly.
Finance - aaah Lenders Fees. Bless them. Generally start at $600-1000 but can skyrocket if you need Lenders Mortgage Insurance. My last mortgage actually set me back around $2500.. The lesson here is, talk to your broker and get a break down of costs assosciated with the mortgage. Some have upfront fees ( for valuations, etc) and others can be incorporated into your mortgage.
Land Tax / Rates / Body Corporate - These are generally paid yearly and it pays to know about them in advance. Here in the city body corporate rates range from $1300-$11,000 per year! I’ll go into depth of what the body corporate does in a later post…
So to sum it all up… It’s hard to put a figure on exactly what your costs will be… Don’t be put off though, your finance broker, solicitor and Real Estate Agent will do their best to help you, just ask!
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2 responses so far ↓
1 juiced // Dec 2, 2007 at 2:10 am
How much is Lender’s Mortgage Insurance?
2 zoeinthecity // Dec 3, 2007 at 2:29 am
Lenders Mortgage Insurance (or LMI) is generally charged as a one-off fee when you are setting up your loan. It is based on a sliding scale dependant on how much you borrow, and usually only applies when borrowing 80% or more against the value of a property, so the more you need to borrow, the greater the LMI cost will be to you.
The only way to find out exactly what it will be in your situation is to contact your lender, or a good mortgage broker.
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