There’s more to the cost of buying a home than just the purchase price – and these extra expenses need to be accounted for.
So you’re ready to buy a new home or investment property. You’ve done the math, you’re saving hard, you’ve got some equity you can access, and you know exactly what you need to borrow to get there.
But hold on a minute. Have you thought about all the extra expenses that are associated with buying a property? Legal expenses, removalist costs, insurance, furniture – there is a whole string of costs associated with buying a new home and failing to price these into your budget could delay your plans, or worse still, plunge you into debt.
Buying a home or investment property can be an all-consuming undertaking. Researching the market, deciding where and what to buy and getting your finances in order is no small matter, and so it is easy to forget some of the seemingly peripheral issues.
But the earlier you tot up all the additional purchasing costs and factor them into your overall budget, the better placed you’ll be to keep your head above water.
So how do you go about identifying all those extra expenses? Well, there are some things you can’t avoid and others that you can sidestep.
Take pest and building inspections, for example, which crucial to ensure against any nasty surprises down the track and usually a requirement from your lender. These inspections can easily cost you around $500.
Then you have insurance costs. You have to cover your property to safeguard against fire and other such disasters, and again most lenders require it.
If you’re taking out a loan over 80 per cent of the property’s value, you’ll also need lenders mortgage insurance (LMI), which can run into $1,000s – though this could be factored into your loan.
In addition, you’ll face legal costs associated with purchase and these could add up to anything from $800 to several thousand dollars.
Outside these fixed expenses there are other costs that you’ll need to think about. These include removalists, new furnishings and perhaps decorating. It’s hard to place a figure on what this may come to, but it’s probably better to think about this after you’ve set a budget aside for the essentials.
You may well be able to save on removalists by enlisting willing friends and family, and while it may not be ideal, if funds are short you can always beg, borrow or steal furniture from your nearest and dearest – at least for the short term.