Home loan fees and charges

When you want to buy a home in Australia, the price of the home is not the only cost. There are a number of fees that are necessary and will add to the cost of the house. The deposit is the largest outlay you will make. Required fees should be carefully understood, so that you see the total cost of buying your home before you make a decision. The main fees will be lender fees and government fees. Lender fees are for their services, and government fees are based on the value of the property and may vary from state to state.

Lender Fees

A lender fee, or establishment fee, is for processing your home loan application and may include property valuations among other things. The property needs to be valued at the time of the purchase because property values can change with the strength of the overall economy. This fee should also cover the cost to the lender for documentation, loan approval and any searches required. It also includes Lenders Mortgage Insurance (LMI) which protects the lender if the borrower defaults on any repayments. A lenders fee is paid once at the beginning of the home purchasing process.

The lender can also claim deferred fees if the loan is repaid within a specified time. This can be an establishment fee or a settlement fee depending on when the loan is discharged. The lender absorbs costs connected with settling the loan or with setting up your loan and will require you to pay these costs. There is also a discharge fee or exit fee when the loan is repaid in full to cover the cost of processing the discharge documents.

It is possible, although unusual, for a fee to be charged for early discharge of a loan. The lender is depending on the fixed term of the loan to cover their costs, so there may be a penalty for discharging the loan early.

If your home loan is part of a package of banking products including credit cards or a savings account there may be an annual fee to administer the package. If your home loan is the only product with a bank, they could charge account keeping fees. A fee for the administrative costs may also be charged if you want to change from one type of loan to another. For example, if you need to change from a fixed rate loan to a variable rate loan or want to change your repayment frequency or amount. There is also an account transaction fee, based on usage, if you want to redraw money from your loan.

Government Fees

Government fees need to be paid no matter who your lender is. They include mortgage registration fees, mortgage stamp duty and stamp duty. Any land purchased in Australia, including buildings, has a tax payable to the government. This is called stamp duty and varies between the states. The amount of the tax depends on the purchase price of the property or the market value, whichever is more.

Mortgage stamp duty is paid to the government, in Australia, to make the mortgage document legal. This varies between states and depends on the size of the loan. Mortgage registration fees are paid to the proper state authority. This registers your mortgage with the government. Both of these fees are paid by the lender for you.

Legal Fees

There are intricate legal processes than need to be done by a solicitor or conveyancer. These experts are necessary to make sure the documentation and settlement processes are done correctly. The fees will vary from state to state and depend on the time and work required by the solicitor or conveyancer. The two main charges are a disbursement fee and a legal fee. The legal fee is for their time. The disbursement fee is for any enquiries or searches that need to be done on the title.

Before you Move in

It is wise to have a professional do a building and pest inspection. The building report is to see if there are any structural problems with the house. This includes plumbing leaks, roof leaks and mold or mildew. If there are problems, it will have an effect on the purchase price. A pest inspection should document any pest infestation and the remedy for removing it.

Surveys confirm that the local council has approved of the construction of the house according to their regulations. It will also show that the house is situated within its proper boundaries.

You will also be liable for rates to be paid to the local Council on what remains during the quarter at the time of the settlement. These rates are to pay water and sewerage costs as well as costs for the local infrastructure. The amount will vary according to the place and value of the house or property.

Strata fees are to pay for shared areas such as building exteriors, pools and gardens in an apartment or managed community. For this type of property, these fees will be stated in the sale contract.

All of your utilities will need to be disconnected from your previous residence and reconnected in your new home. This includes electricity, water, subscription TV, telephone and internet connection. Some of these companies require a bond before they make the connection.

There will be moving costs when you have finally purchased a new home and are ready to move in. These costs can be substantial if you are moving a long distance. If you decide to move your furniture and household items yourself, you will need a rented truck, boxes and packing material, insurance for the time of transit and the cost of petrol for the truck and any cars that make the trip. If you choose to employ a professional moving company, these costs will all be included in their fee.

After the valuation has been done, if the borrower changes their mind and decides not to proceed, there will be a non-proceeding fee. If the contract has already been prepared when the borrower withdraws, there will be additional fees.

For descendants of Aboriginal and/or Torres Strait Islanders the Australian Government gives loans, when they are available, without a loan application fee or a professional fee for the mortgage preparation. For existing loans, they charge late payment fees and discharge fees when the mortgage is formally discharged.

A professional mortgage broker is the most efficient way to begin the process of obtaining a home loan. They will understand your unique situation and help you find the right financing plan. Good mortgage brokers know how to find the best loan deal, possibly even with your own bank. They will also help get the financing approved and support you every step of the way to home ownership.