It’s no secret that buying a home is an expensive task. But whether it’s finding the right legal professional or staying up to date on current home loan offers, there are ways of cutting costs that will save you thousands in the long run.
In this article, we’ll take a look at the different costs involved with a home loan and buying a property. Also, we’ll discuss ways you can reduce these costs. This should make your search for the right home loan easier.
- Home loan fees
- Lender’s Mortgage Insurance (LMI)
- Legal fees (conveyancer vs solicitor)
- Property purchasing costs
- Your next steps
Home loan fees
Home loan fees are the fees that include fees to set up and maintain your home loan, which are the application fees, settlement fees, and monthly and annual costs. Every lender charges different fees depending on:
- The type of loan offered
- The type of property purchased
- The property’s purpose (are you buying as an owner/occupier or investor?)
If you want the best deal in the market, then you need to research and compare home loans across lenders. This is due to the variations and accessibility of different products available in the financial market. Here’s a case study to demonstrate how breaking these costs down can help you find the cheapest loan faster:
John is looking for a 2 year fixed rate loan and has found several lenders offering a similar deal. Subsequently, he and his mortgage broker are comparing 2 year fixed rate loans. These loans are offered by four different lenders and they need to determine which is the cheapest. However, when each lender charges different fees and different amounts for each fee, comparing the total cost of these loans can become difficult.
Yet, by combining the loan amount, interest rate, revert rate, and monthly repayments owing in the next 3 years and 30 years, we can now see how much these loans will cost in the short and long term. As a result, this allows for quick and easy comparison which reveals the Adelaide Bank loan is the cheapest.
Lender’s Mortgage Insurance (LMI)
Banks had recently implemented changes to accept home loan applicants with a deposit that’s smaller than 20% of the property’s value. However, with a small deposit, some lenders may charge you Lender’s Mortgage Insurance, or LMI. LMI is a one-off cost that protects the lender, not the borrower, in the event a borrower can’t pay back their loan.
Although paying a smaller deposit can help you get your dream home faster, LMI can be costly. Hence, it’s a cost worth avoiding if possible. Check out our guide to LMI and how to avoid it to see how you could potentially save tens of thousands of dollars while still getting a great deal on your home loan.
Interested in how much LMI you’ll have to pay with a smaller deposit? Use our LMI calculator to get an estimate of how much you could be paying.
When buying a property, contacting a conveyancer or solicitor will help you secure your home loan and protect your purchase legally. This is because a legal professional will help you transfer the property into your name and verify the other aspects of your home loan application.
Typically, a solicitor can provide a wider range of legal advice than a conveyancer, who can only provide you with legal advice related to property. However, solicitors are usually more expensive than conveyancers as they can provide legal advice across a range of areas.
It may be tempting to cut costs and attempt doing the legal work on your own. However, you run the risk of encountering legal issues later on if something isn’t completed properly, which will ultimately cost you more in the long run. As so, having a qualified legal professional review your application will give you peace of mind as you handle this big financial advice.
For more information about conveyancers and solicitors and which one is right for you, check out our article on conveyancers vs solicitors.
There is a range of other costs you’ll need to take into account when buying a home. We refer to these as property purchasing costs, as they are not directly related to your home loan, but are still costs you need to pay before you’re given the keys to move in. These costs can be broken down as follows:
- Stamp duty
- Building and pest inspections
- Removalist fees
- Council rates and strata
- Repairs and renovations (if applicable)
The best way to reduce these costs? Do your research! Although usually, your state government fixes the stamp duty, the other costs often vary depending on:
- The location of your property
- The type of property you’ve bought
- The condition of your property (Pest damage? Outdated kitchen? New home?)
Doing your research will prepare yourself for how much you’ll need to pay when moving in. Alternatively, you might be able to cut costs by hiring a different removalist or doing a few things yourself. In fact, your options really are endless if you’re well-prepared.
Unsure of what these costs are and why you need to pay them? Check out our guide to property purchasing costs or our guide to investment property costs if you’re buying an investment property.
Interested in how much your upfront costs will add up to? Check out our upfront cost calculator to get an estimate of how much you could be paying.
Your next steps
If you’re looking to cut costs with your home loan, you’re not alone. With property prices at record highs, many buyers are struggling to meet the upfront cost requirements for their home loan or struggling to find someone to help them.
That’s where we come in. As experienced ethical mortgage brokers, we’ll help you research and compare loans from over 30 lenders. That way, you can get the best deal for your short and long-term goals on the market. We’ll save you time and money by helping you prepare your application and talk to banks. After all, you should be focusing on the exciting bits of buying a home!
If you secure a home loan through us, we’ll donate up to 50% of our profits. This means, a family doing it tough in Australia or the Asia Pacific region can get a home too.
It’s never too early to get a helping hand with your home loan. Send us a message to get all your burning questions answered quickly and free of charge.
Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.