What we have been doing up until this point is working out your maximum loan amount and how much you can repay. But when looking for a property to buy, it is easy to become attached to places that are just shy of your intended budget. We tend to want the bigger and better options immediately, and if offered enough of a loan to achieve the better property it is very tempting to take the amount of money a lender is willing to give you and to forget about your own maximum loan amount.
It is easy to lose control of how much you really have, and you may find yourself in more debt than you had planned or want to be in.
How much will it cost to buy a property?
There are numerous costs that creep in when you buy a property. In Australia, some of the most common costs of buying a home include:
- stamp duty tax;
- property valuations;
- legal fees;
- home and contents insurance;
- property surveyor;
- building and pest inspections; and
- mortgage insurance.
All, more or only some of these listed costs may be relevant to your situation. For example, you may not need a property surveyor.
These could add up to be $10K, $20K, $30K, $50K or maybe even more on-top of the cost of the property. Acknowledging what costs may apply to your home loan when you buy will ensure you budget for all costs and stay within your limits.
Make a list of all of the possible costs when buying a property and add them up.
You can even work out how much your stamp duty is going to cost you. This is an important step to working out how much you can spend on a property. All these expenses add up.
If you are not sure how much stamp duty will cost, add together your maximum loan amount plus your savings, and then go to an online stamp duty calculator to work out the stamp duty on that amount. For example, if your maximum loan amount is $300,000 and you already have $150,000, work out the stamp duty for a property that is the sum of those two amounts (e.g., $300,000 + $150,000 = $400,000) to give you a rough estimate of stamp duty costs. Note, this would not be the amount you would buy a property for as you would need to also take into account those additional costs, but this gives you a rough guide.
Add up all the costs and write that down.
Up next we’ll get to a more clearer picture on how much you can spend with ‘How to work out your buying budget?’