You can split the upfront costs when buying a house into the Deposit, fees associated with the loan, and fees associated with the property.

Fees associated with the loan include:-

• Establishment fee
  
• Valuation fee
  
• Mortgage Stamp Duty
  
• Mortgage Insurance
  
• Mortgage Preparation Fee
  
• Registration Fee

Fees Associated with the Property include:-

• Land Transfer Stamp Duty
  
• Solicitor/Settlement Agent fees
  
• Sundries (searches etc...)
  
• Shire/Water Rates
  
• Registration - Transfer of Land

Deposit

One of the first upfront costs related buying house is the deposit. Many lenders require will a minimum deposit of 5% of the purchase price. On a property purchase of $500,000, a 5% deposit would be $25,000.

If cash is tight then don't despair, there arelenders who provide 100% home loans and even some who will lend you 105% of the property value.

Should you be putting less than a 20% deposit down then you will need to be prepared to pay Lenders Mortgage Insurance or a Lenders Risk Fee. This is a one off payment made to the lender.

Establishment Fee

An establishment fee is the cost of setting the loan up. An establishment fee can cover costs such as the application fee, valuation fee, preparation of mortgage documents and settlement fee. Some lenders will include all the costs in one establishment fee while others may charge the fees independent of each other.

Establishment fees are generally around $600. Not all lenders charge an establishment fee, some lenders will not charge an upfront fee but will have higher exit costs should you choose to exit the loan before the agreed period has expired.

Valuation Fee

The Valuation fee is the cost paid to the valuers to value the property you are purchasing

Mortgage Stamp Duty

Mortgage Stamp Duty is a government charge that is levied on top on the mortgage. The fee charged depends if the property purchase is an owner occupied property or an investment property.

Mortgage Insurance

Many people get confused with what mortgage insurance is, they assume it is protection for the buyer.

Unfortunately this is not the case, mortgage insurance protects the lender. It is generally called Lenders Mortgage Insurance or LMI. Should you default on your loan repayments the LMI will cover the payment of any outstanding amount on your loan, once the lender has received the funds from selling your property.

Generally if you borrow more than 80 percent of the property value you will be required to pay the LMI. With some lenders you may be required pay LMI if the loan to valuation ratiois less than 80%.

Lenders mortgage insurance is charged as a one-off premium and is calculated based on the amount of the loan and the Loan to value relationship. The higher the loan amount and loan valuation relationship the higher the lenders mortgage insurance premium.

Lenders mortgage insurance does not have to be an upfront costs related buying house. Many lenders allow you to cap the lenders mortgage insurance on top of your home loan.

However,if your home loan is for more than 95% of the property value then another upfront costs related buying house is the requirement to pay lenders mortgage insurance upfront. The higher the loan the greater the LMI you would be expected to pay.

Mortgage Preparation Fee

This is the charge for preparing the documents ready for settlement. It is a fee that is often included as part of the establishment fee.

Registration Fee

The Registration Fee is a government charge .........................................................

Land Transfer Stamp Duty

Land transfer stamp duty is generally the largest of the upfront costs related buying house. The land transfer stamp duty is a general revenue tax imposed by the government.Whenever a property changes ownership the stamp duty is paid into a government fund.

As property prices have risen in Australia so has the stamp duty payable. On a purchase of a $500,000 home you would have to pay a land transfer stamp duty bill of $20,700.

Until the WA state budget in 2007 the stamp duty was payable by all purchasers, and first home buyers on purchases over $250,000.

Its worth taking into account the upfront costs related buying house such as the stamp duty when you negotiate your deposit.In Western Australia the stamp duty has to be paid prior to settlement, so you may find that you need to keep some funds back to cover the cost of the stamp duty.

The State Budget in May 2007 has just seen the threshold for first home buyers double to $500,000.

Here is a stamp duty calculator to help you calculate how much stamp duty you will have to pay.

Solicitor/Settlement Agent Fees

You will need to engage a settlement agent to attend to the final stage in the purchase of your property. This involves the transfer of the legal title from the seller (vendor) to the buyer (purchaser).

The balance of the purchase price is paid and any other outstanding matters are attended to.

Settlement Agents Fees are set by legislation, which means there is a maximum amount thatthe settlement agent can charge.

When sourcing your settlement agent be sure to ask for a discount as many will give a discount off the fee set by legislation.

Sundries

Sundries covers the costs to the Settlement Agent for ........ which they will pass on to you the client.

Shire/Water Rates

When you purchase a property as part of the settlement process you are required to pay the balance of payment on the Water and Council Rates for the current financial year. The amount of the fee payable will depend on the time in the financial year the purchase is made. The Settlement agent will organise this for you.

Registration/Transfer of Land

The costs involved with the transfer of the interests of a registered proprietor to a purchaser by means of lodgement at, and acceptance by the titles office.

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