How much does it really cost to buy a home in Queensland? We had a chat to Mike Douglas, the Lending Manager at Mad About LIFE (based in Paradise Point) to find out a little more on what expenses to budget for…
The short answer to this question is, ‘it depends’. There are the usual or standard transaction costs we all know about like stamp duty, conveyancing and inspections.
However, there are other less obvious costs that are more specific to the individuals circumstances or the property being purchased (ie insurances).
Explore our comprehensive guide on purchasing and residing in Paradise Point, as well as its neighboring suburbs including Runaway Bay, Hollywell, and Biggera Waters.
Loan type
An example of costs associated to an individual would be determined by how they are purchasing the property.
Are they paying cash?
Do they need to borrow?
And if they do, what loan product/structure do they need.
Different loan products can very a lot with what costs are then incurred. For example, some will require the Property Valuation to be paid for and provided upfront before the loan has even been approved. Depending on the type of loan, purpose and property type this can be in the hundreds of dollars (thankfully in most cases lenders absorb the cost of valuation).
Setup and establishment fees
Loan setup or establishment fees can vary greatly depending on the borrowers needs and circumstances. For example, a couple with stable PAYG income buying a home to live in is quite straightforward, as opposed to a credit-impaired self-employed person buying an investment. Whilst the most straightforward and competitive loans may have no establishment fees, other more specialised loans can have fees up to $900 and risk loadings.
Finally there is the cost of insurance.
Lender’s Mortgage Insurance (LMI)
If the buyer is purchasing with a deposit amount of at less then 20% of the purchase price, then the lender will require Lender Mortgage Insurance. This covers the lender’s risk in loaning the money (it protects them, not you!).
This can be a significant cost into the tens of thousands, but can be capitalised into the loan (adding to the loan size).
This amount is variable based on the lenders insurer, loan size and loan to value ratio (LVR). For example, a $400k property @ 95% LVR with capitalised LMI, will incur a premium of in the range $10,000-12,000 (depending on the insurer used by the lender).
In simple terms, if you’re looking to buy a $400k property and only have a 5% deposit of $20k, you will be hit with a $10-12k LMI fee to protect the bank. You can add this into your loan, so you’ll end up needing to borrow $410-412k to cover the fee.
Home insurance
With the new liabilities that come with owning property, it is important to consider or review insurance requirements to ensure you are appropriately covered. You will definitely require home insurance prior to your loan settling however you may also want to consider contents insurance, life insurance and income protection.
So in summary…
Using the NAB Stamp Duty Calculator, based on a $700,000 property, first home buyer, QLD, living in the property
Stamp duty: $17,350
Mortgage Registration: $192
Transfer Fee: $2,064
Then, additional costs:
Conveyancing : Expect to pay around $900-$2000 (ring around get quotes. Make sure you like them)
Legal documentation and settlement fees (reimbursing owner for any rates paid up front)
Valuation – most banks will include the property valuation inspection as part of their finance agreement. These can cost up to $600
Building & Pest Inspection –
Loan set up: $0 – $900 (can be double if setting up splits or Family Guarantees)
Insurances: Can vary greatly
Moving costs: A few hundred to thousands for interstate moves
Storage costs: If needed
Deposit: the more you have (or lower the LVR) will reduce the above costs. = Cheaper loan products.
Lenders Mortgage Insurance
Using the above scenario based on the calculator here
$700k loan, 40k deposit
Need to borrow $660,000
LMI due would be $32,604 and can be added to your loaned amount.
If you had $70k deposit
Need to borrow $630,000
LMI would be $15,624.00
Note: This is an estimate only, please contact your lender for a detailed quote.
If you had $140k deposit
No LMI as loan of $560k is 80% or less of house price
For further information, contact Mike
Mike Douglas
Mad About LIFE Finance
Mike@madaboutlife.com.au
Website: www.madaboutlife.com.au
Office Phone: 1300 971 192
The above information should not be taken as financial advice. Please contact your financial advisor or lender for personalised advice.