When you’re saving up to buy your first house, you’re likely accounting for mortgage costs and monthly payments, adding in insurance and maybe even a realtor’s fee. But there are a ton of other costs you might not know about.
How much you pay to the seller upfront on the price of the house. Many people think you need to put 20 per cent down, but the average down payment is actually between six and 11 per cent (depending on the market, your credit history, the house, etc.).
This is the obvious one: What you’re paying every month on the road to home ownership. The average monthly mortgage payment in Australia is $2321, but varies substantially by region and state.
Lenders Mortgage Insurance
When you make a down payment of less than 20 per cent, you’ll be required to purchase lenders mortgage insurance at an additional cost. LMI is paid monthly to an insurance company.
This is where a lot of surprises come in. Most people save for years for a down payment, and while that’s a hefty sum, it at least gives them equity in the house. Closing costs, on the other hand are a different story, and there are a lot of them: For a $400,000 home, NerdWallet says you can expect to pay $8000 to $13,000 in additional costs to your lender and other third parties, broken down like so:
• Appraisal fee: the professional estimate of the home’s value.
• Survey fee: the cost for verifying a home’s definitive property lines.
• Wire transfer fee: the charge to wire funds to purchase the home.
• Underwriting and origination fees: the charge associated with evaluating, verifying and processing the loan application.
• Document prep fee: the cost associated with prepping your loan documents for processing.
• Discount points: paid at the time of the deal to lower the interest rate on your mortgage.
• Credit report fee: the charge for pulling your credit history and scores.
• Title insurance: a must-get policy that protects you in case the seller doesn’t have full deed and authority to the property.
• Recording fees: government fees for entering new property records.
You may be able to negotiate with the seller to cover some of the closing costs.
You also need to factor in repair costs, homeowners insurance and utilities. You can ask your agent for a breakdown of averager costs in your area, or use this tool from Your Mortgage to work out the extra costs. (Note: Homeowners insurance is different from LMI, and is an ongoing annual cost.)
If you’re sprucing up your digs, you can add those expenses on top of everything else. If you’re a first-time buyer, remodeling and buying furniture will likely be lower-priority expenses, but according to Zillow, you can expect to spend $US3,021 ($4,109) a year on average on things like carpet cleaning, yard work, gutter cleaning, etc., if you don’t do those tasks yourself.
Finally, don’t discount other costs, like moving, which can add up quickly!