Have you been looking at property for sale to buy as your first home? First off, congratulations! Purchasing real estate can be an exciting and rewarding experience.
Tim Lawless from CoreLogic RP Data acknowledged that while the recent rate of property growth has been extreme, making affordability a real challenge, there is potentially a positive development for prospective buyers around the corner.
"Listing numbers are moving higher, providing more choice and taking away some of the urgency that many buyers have been faced with when considering to purchase in this fast-moving housing market," he said.
Mr Lawless cited a number of reasons for his forecast, including auction results that have been consistently moderating, a rising number of listings and a drop in demand from investors following stricter lending conditions from the banks.
Essentially, these factors are all contributing to help make receiving the keys to your first home a more achievable prospect! However, it pays to be aware of all the costs associated with buying a property, as there is a lot more to consider than just the price tag. Here are some of the expenses to factor into your equations:
Pest and building inspections
While professional inspections may not be compulsory, the Australian Securities and Investments Commission (ASIC) strongly recommends going ahead with them before exchanging contracts. They can save you a lot of money down the line, by potentially identifying insect or rodent infestations and homes that aren't structurally sound or don't meet regulations.
Home loan fees
When it comes to home loans, there is normally an establishment or application fee. This can vary depending on your lender, but the main banks all charge around $600.
And then we have lenders mortgage insurance (LMI). While the (ASIC) advises saving a deposit of at least 20 per cent of the property's value, sometimes this just isn't feasible.
This is especially true when you look at how the market has grown in recent times, as the Australian Bureau of Statistics affirms the combined capital city values have increased almost 10 per cent in just the 12 months to June 2015.
If you do find yourself having to borrow more than 80 per cent of the home's value, it's likely that you will have to pay LMI. This is an upfront expense to insure your lender in the case you default on your mortgage - in most cases it can be financed into your home loan.
For example, the ANZ mortgage calculator shows that if you wanted to purchase a $400,000 home with a 5 per cent deposit ($20,000), you would be expected to pay over $13,500 in LMI.
Stamp duty
This is a state government tax and undoubtedly one of the biggest expenses you will likely encounter when buying your home. As a first home buyer, you may be entitled to particular stamp duty concessions - but just like the size of the tax, this does depend on the state you live in.
Legal expenses
There is a mountain of paperwork and legal matters that need to be scaled when buying a home, which is why you will need to employ the services of a solicitor or conveyancer. It's important that you enquire about their fees before deciding on a professional to use.
Insurance
Almost all homeowners need insurance, as normally your lender will make it a condition of your loan settlement.
Miscellaneous expenses
The aforementioned costs are perhaps the most prominent, but it's vital that you don't forget other expenses like moving, furnishing, council rates and utilities. While your real estate in Australia is likely to provide you with gains in the future, it will require constant upkeep, which is why it is always a good idea to have a sum of money set aside for any of these circumstances.
