Covering all costs: Lending fees checklist

So you’ve finally found the perfect property. Everyone agrees; even the dog likes it!

If you’ve done your homework, all you need to do now is finalise the details, because otherwise, your dream home may turn out to be for someone else.

Before getting too entrenched in the house hunt, it pays to understand how much you can borrow and how much you’ll have to spend to buy the house. That way you won’t get caught short when you settle.

With this objective in mind, financial planners recommend that potential loan applicants need to be prepared for all potential costs. Here are some of the key things to keep in mind. 

How much can you borrow?

When a lender assesses your loan, they will look at a number of lending criteria, including: 

• Income: Is your income full time or part time? Have you earned consistent income for a consistent number of years? Do you earn dividends from shares or managed funds? Are you on a pension? 

• Commitments: Such as credit card debt, personal loans or other property loans. 

• Living expenses: Such as food, electricity, rates, etc. 

• Deposit: How much deposit do you have saved? Is the deposit from genuine savings or a gift? 

• Property price: How much you can borrow will be affected by the property’s value. 

• Credit history: Your previous credit history will be assessed by a lender and could well decide whether they lend to you.

How much will it cost?

It’s crucial that loan applicants consider the following lender fees: 

• Loan application fee or establishment fee: Charged for the work a lender does on your loan application. Depending on the amount you borrow, Savings.com.au suggests this cost can vary from $150 to $700. 

• Valuation fee: If the lender’s credit assessment includes a property valuation, there’s a charge of between $100 and $300. 

• Mortgage discharge fee: This is when the lender charges for its time to lodge the discharge of mortgage to the titles office. The cost can range from $150 to $400.

• Lenders Mortgage Insurance (LMI): When you borrow more than 75 per cent of the property value, some lenders may insure your loan against loss. It’s a one-off fee of around 0.80 to 1.80 per cent of the loan amount — and may be refundable if the loan is paid out early.

Government fees and other charges 

• Stamp duties: Stamp duty is payable on both the registration of the mortgage and the transfer of land. 

• Titles office: The relevant state titles office may charge a fee for the registration of the mortgage and the transfer of land on the certificate of title.

Other costs

• Conveyancing fees: When you buy or sell a property you normally engage a specialist to look after the transaction, this may be a solicitor or a conveyancing agent. Open Agent suggests that conveyancing fees cost between $400 and $1,400. 

• Other disbursements: Costs such as title search fees, Environmental Protection Authority reports, general adjustments and other fees may also be incurred. 

• Building insurance: Most lenders will need a certificate of currency for your building insurance.

Using a checklist is a great way to be prepared for any potential costs and bring you closer to your next property purchase. 

Bank or Broker?

With many lenders to choose from, you may decide to get help from a mortgage broker. A mortgage broker is a go-between who deals with banks or other lenders to arrange a home loan. Mortgage brokers must act in your best interests when suggesting a loan for you. 

A good broker works with you to:

• Understand your needs and goals.
• Work out what you can afford to borrow.
• Find options to suit your situation.
• Explain how each loan works and what it costs (for example, interest rates, features and fees).
• Apply for a loan and manage the process through to settlement.

Banks on the other hand only offer their own products and approvals are strictly based on their current lending criteria. Banks might not be as flexible for those buyers who require specialised lending options. 

We suggest you ask your bank & a broker for information on how they might be able to assist you based on your current circumstances.