Are you planning to buy your first home? Congratulations! But, before expediting the process with excitement, it’s essential to be aware of the common pitfalls in property conveyancing that first-time homebuyers often make. First-time property buyers are unaware of various legal fees because these aren’t necessarily specified in attractive real estate advertisements. “There has been an 18.62% increase in the costs of essential services like building and pest inspections, and conveyancing and legal fees in Melbourne, Brisbane, and Sydney from 2022 to 2024”- Financial General, ABN Newswire. Being a first-time homebuyer, you must prepare to pay these expenses which add a substantial financial burden. In this blog post, I’ll explore the common mistakes committed while property conveyancing, must-pay conveyancing and legal costs of buying a house, hidden costs, factors influencing the legal fees, and the smart ways to manage these expenses.
➤ Ten Common Mistakes You May Commit While Property Conveyancing
Knowledge of must-pay conveyancing and legal fees helps with optimized financial planning and saves you from paying extra that you shouldn’t pay. Here is a checklist of 10 points that will save you from committing mistakes most Australian first-home buyers do-
- Choosing the wrong conveyancer/ solicitor
- Ignoring the importance of property survey before purchase
- Not doing intensive research to know the latest norms, issues, and risks
- Not exploring associated restrictive covenants
- Not understanding the involved legal processes
- Not reading the property purchase contract carefully
- Not being ready for unexpected delays
- Not understanding the sunset clause
- Not knowing and calculating the hidden costs
- Not arranging loan documents in order
Now, you have the basic knowledge of possible pitfalls in buying a property; therefore, you can initiate the first home-buying process with a unique sense of secured investment.
➤ The Must-Pay Conveyancing and Legal Costs of Buying a House You Might Not Know
Do you know the must-pay conveyancing and legal costs of buying a house and several hidden costs? Here is the list of conveyancing and legal fees that will help you arrange adequate finance-
1.Stamp duty: It is a tax enforced by state or territory governments. It is assessed based on the property purchase price; therefore it varies according to the amount you pay and the property location. This is the biggest upfront cost you pay for first home buying. To calculate the stamp duty in your state or territory, you can use the free Stamp Duty Calculator. Pro-Tip: You may be eligible for a stamp duty concession. Visit the website of your territory revenue office.
2.Transfer fee: This fee is enforced by state governments for transferring the title. The transfer fee varies depending on the property location.
3.Mortgage registration fee: Enforced by territory governments, the mortgage registration fee varies between $119 to $220.
4.Legal and conveyance fees: You can expect to pay $700 to $2500 depending on the complexity involved in property purchase. You pay these fees to get the services of a licensed solicitor/ conveyancer who performs the following tasks:
- Checks title and ensures that everything written is correct.
- Ensures hassle-free and legally correct transfer of the property title
- Coordinates to pay for stamp duty
- Draft the settlement documents
5.Mortgage application fee: The bank charges this fee to set up your mortgage. Different banks charge differently. So ask them to itemize the fee structure. You might be eligible for reductions in fee deals; check your eligibility. These fees should be mentioned in the loan contract.
6.Lenders Mortgage Insurance (LMI): If you have a 20% deposit, the lender mortgage insurance fee is not applicable to you. This one-time fee varies between 1 and 3% of the loan amount. You should include LMI cost in the required loan amount.
7.Inspection fee: You can skip this but hiring a registered and experienced building inspector to uncover hidden issues is a good practice. Rectifying hidden issues at an advanced stage costs hefty.
8.Building Insurance: It is compulsory; premiums vary at large. You should expect to pay around $1000 a year for building insurance and around $500 for the insurance of goods in your home.
There are certain hidden costs also; you should be aware of them to plan better. Some of the hidden costs, you should be ready to pay just after purchasing a home, are-
- Moving expenses
- Ongoing loan managing fees like annual charges, account-keeping fees, service fees, etc.
- Pest inspection cost
- Hiring a buyer’s agent
- Making necessary renovations
- Setting up/installing essential utilities
- Refurbishments
➤ Key Factors Influencing the Legal Fees for Home Buying in Australia
When you buy a property for a time in Australia, you need to consider various aspects. A little research may help you make an informed decision to buy the best property on a budget. Legal fees consume a major part of your budget and influence your buying decisions. Legal fees depend upon several factors. You can optimize legal fees to make the whole affair budget-friendly if you consider the following factors-
- Property value: Higher value of properties incurs higher legal fees.
- Location: Legal fees are fixed based on the locality/regional area in a particular state or territory.
- Professional experience: More reputed and experienced conveyancers charge higher fees.
- Complexity involved: The complications associated with the property increase legal fees.
➤ Ten Smart Ways to Manage Legal Fees and Hidden Expenses to Buy the Home at A Lower Cost
Paying regular legal fees while buying a home in Australia is a vital part of the buying process. Still, there are certain ways that you can explore to cut the total cost. First-home buyers in Australia are entitled to financial benefits under different schemes you shouldn’t miss out on exploring. Wouldn’t you like to make your first home purchase a smart real estate investment? Explore the following 10 ways to reduce the required budget for first home buying-
- First Home Guarantee (FHBG) supports eligible first-home buyers in buying a home with a 5% deposit.
- Regional First Home Buyer Guarantee (RFHBG) supports eligible regional home buyers in buying a home in a regional area with a 5% deposit.
- Family Home Guarantee (FHG) supports eligible single parents and legal guardians of at least one dependent to buy a home with a 2% deposit.
- Single people aged 50 years or single parents of a dependent child/children are eligible for the ‘Shared Equity Home Buyer’ scheme that enables them to buy a home with a 2% deposit.
- You may be eligible for first home concession for stamp duty if you meet certain requirements.
- The first home stamp-duty concession applies only to a home valued under $800,000; you can save up to $24,525.
- Compare with other licensed solicitors/ conveyancers and negotiate.
- If the legal fees are a concern, you can approach community legal centers providing free or low-cost legal assistance for first-home buyers.
- Some licensed solicitors/ conveyancers allow you to pay in installments over time.
- If you identify unreasonable charges, raise the concerns with the solicitor/conveyancer. Keep the discussions open and honest. You have the right to request an explanation for any query.
Uncovering challenging excessive legal costs and hidden charges is essential for planning to buy the best at the lowest price. By understanding the legal fee structure, written cost estimates, and scrutinizing invoices, disbursements, and cost updates, you can protect yourself from paying more than you need to do. Hiring a prominent mortgage broker always proves as a game-changer tactic to buy your dream home at the cost you have planned to afford. ‘How to get the rightly-priced funds for first home buying?’ may be a big concern for you. Pro-tip: ASK Financials is a leading mortgage broker with expertise in helping first-home buyers get easy-to-afford finance from reliable sources at personalized repayment terms.
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