Calculating if you’re in the market

Saving for the deposit is just the first step when purchasing a property.

Alongside additional fees during the purchasing process, homebuyers should be factoring in the ongoing living costs of homeownership to ensure the property is within their budget.

Realmark Urban Residential Sales Consultant Lucy Baker said there were a few fees and charges that might slip buyers’ minds when purchasing a property, particularly if it was their first.

“Fees and charges associated on a property transaction include items such as stamp duty and settlement agent fees, as well as insurances that protect you as a buyer like termite and pest inspections, title insurance and building and contents insurance following a successful settlement,” Ms Baker said.

“Fees such as strata, council rates and water service charges are all calculated pro rata and paid back to the seller upon settlement, so there will be an upfront for these services come settlement day.

“I suggest working with a skilled broker, who will be able to include these sundry expenses within your budget, so there are no surprises come your offer being accepted on a property.”

Loancom Australia Managing Director Brad Hetherington said a smaller deposit of less than 20 per cent of the loan would almost always attract a lenders mortgage insurance fee.

“This can be quite substantial, especially when the loan-to-value ratio (LVR) moves over 90 per cent,” Mr Hetherington said.

“The interest rates can be affected so much, as the lenders may not offer the most competitive rates to the higher LVR loans.

“Buyers should also consider that the interest rate offered at application and settlement may, unless a fixed rate term is taken, increase in the initial term of the loan, which is generally the most difficult time for homebuyers, so it is important to keep this in mind and budget for such an event.”

Ms Baker said for those transitioning from renting to homeownership for the first time, the main new costs to consider were ongoing large maintenance items and fees such as water and council rates, or strata levies if it was a strata-titled property.

“Calculating these fees into an annual then quarterly or monthly budget is the best way to grasp whether or not you’ll be stretching yourself too thin over and above your recurring mortgage repayments, while dedicated savings for unexpected maintenance will put your mind at ease,” she said.

“An important factor for buyers in the market right now is considering a buffer for when interest rates may inflate.

“Although you may be able to afford the repayments today, forecasting for future increases will ensure you’re future-proofing the serviceability of your loan.”

Mr Hetherington agreed that while it was important to get advice for your individual situation, prospective buyers should ensure they were comfortable with ongoing costs – not only at the nominated rate but factoring in potential increases.

“Consider the possibility of changes in circumstances such as having a child and the continuity and security of your employment situation,” he said.

“If a prospective buyer is currently paying rent and bills, they will have some understanding of ongoing costs but should ensure they have sufficient income to pay loan repayment and bills while also maintaining their desired lifestyle.

“If a prospective buyer is living with parents with no bills, they should set themselves up on a savings plan by putting away the equivalent of their anticipated loan repayments and bills to ensure they can still maintain their desired lifestyle.”

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