Property purchasing expenses: First home buyers guide

By the resi financial blog team, 03 October 2013

First home buyer guide

There are a number of different costs associated with purchasing your first home. These can be especially tough for first home buyers, who are almost certainly undertaking the largest financial commitment of their lives.

Understanding the different expenses involved with purchasing property is important as it will form part of your budget. By being aware of these upcoming expenses you will also reduce the risk of overspending.

Deposit

The first expense you will come across as a first home buyer is the deposit for your home loan.

As a general rule of thumb, saving up 20 per cent of the property's value is a good idea, while retaining some back up savings to cover any extra fees or loan costs that could arise.

Lenders' Mortgage Insurance

If you're unable to reach a deposit of 20 per cent and are forced to borrow more than 80 per cent of the property's overall value, you will be subject to taking out Lender's Mortgage Insurance.

Given the amount of risk a lender is taking by giving out such a large home loan amount, this insurance acts to protect their interests in the event that you are unable to make repayments.

Stamp Duty

Historically named as such due to the physical stamp used to denote a document's transition into law, stamp duty is a fee paid during the handing over of property titles.

This fee varies from state to state, so get in contact with your local State Revenue Office to get specific details pertaining to your location.

Interest Rates and Payments

The interest you pay on your home loan is determined by the rate and the type of loan you take out.

In the current market climate, securing a competitive fixed rate home loan while the cash rate is so low could be a fantastic way to set yourself up for a set period of time (usually between three to five years) and make decent headway into your repayments.

Other features of the loan, such as an offset account and allowances for making extra repayments, will also influence the amount of interest you need to pay overall.

Categories: Financial Services, Home Loans