Embarking on the journey of buying your first home can be both exciting and overwhelming, especially when you’re unfamiliar with the hidden costs that can catch you off guard.
As a first home buyer, it’s important to be aware of these unexpected expenses so you can budget effectively and avoid common property buying errors.
In this article, I’ll walk you through the various hidden costs associated with home buying, so you can ensure a smooth and stress-free experience.
Legal Fees and Documentation
When purchasing your first home, legal fees and documentation are unavoidable expenses that can add up quickly.
Engaging a solicitor or conveyancer is essential to ensure the property transaction is legally sound.
They will handle contracts, conduct title searches, and ensure any restrictions or easements on the property are disclosed.
Legal fees can range from $500 up to $2,000 (or more), depending on your location, the solicitor and the complexity of your transaction.
Additionally, you may encounter costs related to documentation, such as title registration fees and LIM (Land Information Memorandum) reports, which provide critical information about the property and its surroundings. These reports can cost around $300 to $550 depending on how quickly you need it.
To keep costs down, you might want to consider a solicitor with a fixed price fee structure, that includes all disbursements and GST.
Registered Valuation and Building Inspection Costs
A property valuation, often required by lenders, is an assessment of the property’s market value, helping ensure that the loan amount aligns with the property’s worth.
This service typically ranges between $700 to $1,000 (or more), depending on the property type and location. If you are building a new home, there will be extra costs as you may need to get it valued more than once throughout the build process.
Additionally, it’s advisable to invest in a comprehensive building inspection. This inspection identifies structural issues, potential repairs, and maintenance needs, which can actually save you from unexpected expenses down the track. Building inspection costs range from $400 to $600 (or more), depending on the property’s size and location. While these costs might seem burdensome initially, they are crucial for making an informed purchase decision and avoiding costly repairs later on.
Mortgage Fees and Charges
When securing a mortgage for your first home, be prepared for various fees and charges that can impact your budget.
Application fees, also known as establishment fees, are typically charged by lenders to process your mortgage application and can range from $200 to $500. However, if you’re working with a Mortgage Adviser we can often negotiate to get this waived.
As mentioned above, there may be valuation fees, particularly if the lender requires an independent property valuation to confirm its market value for loan purposes.
Another consideration is the lender’s mortgage insurance (LMI), which may apply if your deposit is less than 20% of the property’s value. This insurance protects the lender against potential loss and can add a significant amount to your borrowing costs. By accounting for these fees in your budget for a first home, you’ll avoid surprises and ensure a more seamless home-buying process.
Common Mistakes For First Home Buyers
First home buyers often make a few common mistakes that can lead to stretching the budget and causing unnecessary stress.
One major error is underestimating the total cost of ownership.
It’s not just about the purchase price; ongoing costs such as increased utility bills, maintenance, rates, and insurance need to be considered.
Another frequent mistake is neglecting to get your finance pre-approved before house hunting. Without this, you might fall in love with a property that’s beyond your financial reach.
Additionally, skipping thorough home inspections can lead to unforeseen repairs and costs.
Some buyers also fail to shop around for the best mortgage deals, potentially costing them thousands over the life of their loan. This is where working with a Mortgage Adviser is going to give you the upper hand when it comes to securing a property – and a good deal.
So as you can see, buying your first home involves more than just finding the right property – it’s about being prepared for the hidden costs and potential pitfalls that can arise throughout the process.
By understanding the various expenses like legal fees, valuation costs and mortgage charges, you can create a more accurate budget and avoid unexpected financial issues.
For personalised advice and to explore the best mortgage options for your situation, please don’t hesitate to reach out.
Applications for finance are subject to meeting the lenders criteria, terms, and conditions. Refer to our website www.hbmi.co.nz for our Public Disclosure Document.
