For most people at some stage in their lives, one of the most major financial goals is going to be buying their first home. Most will know that this involves a lot of saving for the initial deposit, and then the regular mortgage repayments, with inevitably what seems like a fairly significant amount of interest paid along the way, but if you are new to this whole ‘buying your first home’ business, you will soon realise that there a lot of other costs that you need to be aware of, and being prepared for these extras will save a lot of financial stress and hardship in the long run.
Loan application and lender’s mortgage insurance - a loan application fee is also known as an establishment, start-up and set-up fee. This will cover things like credit checks and property appraisals, and again the fee will vary according the loan provider you choose. Sometimes, with smaller deposits, you will also need to pay lender’s mortgage insurance, which protects the lenders from borrowers who can’t repay the loan. Generally speaking, if you have saved your 20% deposit of the property’s purchase price, you won’t be asked to pay this insurance.
Inspection reports and moving costs – building and pest inspections will alert you to problems with the property that may not be visible, and if you are moving a large amount of your belongings long distances, these upfront costs can add up too.
Mortgage repayments - these will be the bulk of the ongoing costs involved with owning your own home, and will continue until what you borrowed, you have paid back. Some loan providers will have ways to be able to access the money you’ve repaid if you need it, so again it pays to do your research.
Interest charges – this is the amount of interest that you will pay on the amount you have borrowed. Each loan provider will offer different interest rates, fixed or variable, or sometimes a combination of the two. Having an offset account (a transaction account linked to your home loan) can also help to reduce the amount of interest that you end up having to pay. Again, this is worth committing some time to researching what home loans are available, as this can make a big difference to the amount of interest that you pay in the long run.
Buying your first home is definitely an exciting financial goal, and it is also one of the bigger financial commitments that we will make in our lifetime. If you’re unsure, like I was, where to start in being able to manage both the upfront and ongoing costs of owning your first home, contact the Sound Life Team and they’ll have it sorted for you in no time!
Sound Life & Superannuation Agencies Pty Ltd trading as Sound Life Financial Services are
Corporate Authorised Representatives of Synchronised Business Services Pty Ltd
ABN: 33 007 207 650 trading as SYNCHRON
Principal address: Level 1, 65 Palmerston Crescent, South Melbourne Vic 3051
Australian Financial Services License Number: 243 313