Once you figure out a budget for your new property, it might all seem smooth sailing at first glance.
But getting to that figure is a toiling act. Not all folks have the same figure they can easily copy off of online since it’s highly specific to your location and needs.
And once you get into shelling out expenses, there’s a high likelihood for even more expenditures to slip through the cracks of your budget.
Let’s take a look at these 4 expenses that every new property investment should watch out for, lest they have a headache once it arrives.
Property Insurance
Have you ever considered insuring your home right before moving in?
It’s always a smart idea to have coverage for your home in case things take a turn for the worse. There’s always the looming tendency for theft, vandalism, impact damage (from a car or tree), kitchen fire, burst pipes, and natural disasters to degrade the quality of your home.
Instead of constantly worrying over the possibility of these expenses, property insurance can give you both the assurance and the help you’ll need for your new property and its wellbeing.
There are three types of property insurance plans:
- Building Insurance
- Contents Insurance
- Contents and Building Insurance
If the new property is fully under your ownership, you might like looking into the contents and building insurance to protect all facets of your new home.
Aside from those types of insurance above, the insurers may include benefits such as temporary accommodation (in case your home becomes unlivable) and legal liability cover (covers payment for when an injury takes place or someone’s property is damaged at your home).
If you’re searching for solid insurance coverage for your new property, learn more about types of property-related insurance here and get an online quote.
Loan Establishment Fee
While you may be familiar with the loan plan of your new property, some (not all) lenders charge this to property owners as a fee. The purpose of this fee is to account for the lender’s expenses for the documentation of the process of undergoing the loan.
These are the expenses that’s covered in the loan establishment fee:
- Stamp Duty
- Title Fees
- Valuation Fees
- Conveyancing Fees
- Mortgage Insurance
This fee, also called an application fee, gets spent once you first put down your signature on the mortgage. It’s a one-time, upfront fee that goes for about $250 on average and reaches $800 to $1000 on the highest levels.
Ongoing Loan Fees
Aside from the upfront payment, there are also the annual and monthly charges of your loans to take into account. Lenders only charge one type or the other – so have that written down to understand the breakdown of your costs.
The purpose of ongoing loan fees is to pay the operational costs of maintaining the loan of your home. Additionally, it’s also chargeable as part of the mortgage’s package fee if it’s bundled as a set with other banking products.
It’s also important to keep in mind that not all properties have this fee; in fact, more homes on average aren’t annually charged for their loans.
So while the average cost of this loan across the market is $35, the highest that it can go for is as much as $400 per year — with monthly rates spent more than the market average! If you want to save on costs, direct your eyes instead on investors who don’t charge those fees.
Interests
The interest is not considered a fee per se, but don’t skimp on it. It’s the biggest expense you’ll dump on a home loan. If you have a low interest rate, you could be potentially saving thousands of dollars from the purchase of your property.
Typically owner-occupier loans are the low-cost option compared to investment home loans, so keep that in mind while making the purchasing decision for your property.
According to statistical studies, the average variable home rate for owner-occupiers is 3.29%. For a 2-year fixed home rate for owner-occupiers, the interest is considerably lower at 2.29%.
Due to the economic situation Australia and the rest of the world are currently facing, home loan interest rates are at historical lows. And with interest taking the bulk of recurring annual expenses — it might be tempting to consider keeping an eye on the current home-ownership situation of Australia.
Want to know more? Contact us for a free strategy session.
