The Dissolving Deposit

Why 5.6% is the magic number to remember.

The challenge for many homebuyers is understanding all the costs associated with purchasing a new home. The purchase price of the property is the most obvious cost however it’s important to understand the additional costs and how they affect your overall deposit.

Time and time again we see clients who are disheartened by having a portion of their deposit dissolve in fees. These fees cannot be funded by a lender so they have a direct impact to the deposit that you have been saving.

To avoid any surprises, its important understand the how the fees on your prospective purchase will impact your deposit amount. Each property purchase, lender and state is different so it’s good to find out which fees apply to your situation.

Typically – the additional costs in the transaction are;

Transfer fees, stamp duty and other government fees

Building and Pest Inspections

Property Valuation

Lenders mortgage insurance

Home/Building Insurance

As a general rule, we allow for approximately 5.6% of the purchase price to represent the fees that would be charge on that purchase. So a $500,000 property with an allowance of 5.6% make a truer purchase price of $528,000.

Whilst this figure can vary slightly, depending on your circumstances it’s an easy figures to apply to prospective properties you are looking at purchasing. Keep in mind, this does not take any grants or potential discounts into account.

At the end of the day, having pre-approval in place or at the very least a good conversation with the right person allows you to thoroughly explore loans options and be well informed about the fees and understand exactly how they apply to you. This will ensure you are ready when it comes to the crunch and don’t feel the shock of unexpected costs.

Liz Barter
Home Loan Partner