Buying a property in Queensland? What you need to know before getting hit with hidden fee’s and charges!
Are you looking at buying a property in Queensland? Welcome to property investing in the sunshine state! Buying a property in Queensland has the same ‘hidden costs’ as many other States of Australia, but there are a few more that you should know about!
Queensland’s vast distances, economic fluctuations and outright disaster zones makes choosing the right property, a risky business! So here we have prepared the ultimate guide for what to look out for when making your first, or next purchase!
What are the hidden costs of buying a property in Queensland?
So you’ve had your deposit and have a pre-approval from your lender, now it’s just burning a hole in your pocket! But you’ve heard of the hidden fees and charges when buying a property in Queensland… so how much do you need to cover your expenses? The good news is that the Queensland property market is on the upswing with predicted growth at up to 14% in the coming five years and, compared to our southern neighbours, housing is still relatively affordable. The bad news is that some of Queensland’s hidden fees far exceed what you may be used to paying in other states and territories. Here’s what you need to be prepared for.
Transfer Duty in Queensland
Transfer Duty is otherwise known as Stamp Duty in many States and Territories. In Queensland, it is calculated based on the value of the property and the purpose of the property. First home purchasers you are in luck! The Queensland Government have a first home concession, which only applies to a home valued under $550,000 and can save you up to $15,925! Buying an investment property in QLD attracts a far higher percentage of transfer duty, however compared to other states, Queensland’s transfer duty tends to be modest. This is great news because your stamp duty costs are generally one of the largest costs of buying a property in any state.
Get an estimate of the transfer duty on your future Queensland property here. (HYPERLINK) https://www.qld.gov.au/housing/buying-owning-home/advice-buying-home/transfer-duty/how-much-you-will-pay/concessions-on-transfer-duty/concessions-for-homes/first-home-concession
Conveyancing and Legal Fees in Queensland
If your property purchase is a standard transaction of one property, you should expect to pay in the ballpark of $1500 – $2000 in legal and conveyancing fees. There are dozens of “cheaper” conveyancing firms operating in Queensland; however, it pays to ensure your conveyancer or solicitor will complete their job diligently and review all documentation / information including the legality of renovations, other improvements, covenants, caveats and more importantly local hazards, including flood maps and restrictions around fire hazards. These items can significantly increase your Building Insurance annual fees.
Lenders Mortgage Fees
Every lender will have its own set of fees, which is why it pays to shop around! These fees include, but are not limited to, application fees, annual fees, administration fees and other account fees! For this reason, it is important for you to read the fine print and understand all costs associated with the loan, not just the interest rate! In many cases, the hidden fees make up for the “lower interest rate” offered to you! Let’s break it down a little further…
Jim is looking to buy his first home at a purchase price of $250,000. He has a 20% deposit saved. Bank X offered Jim a 3.5% interest only rate, with a $1,000 establishment fee and no ongoing fees.
Bank Y offered Jim a 3.3% interest only rate, with a $1,000 establishment fee, .5% management fee and $1,000 yearly administration fee.
Bank X per annum = $8,000
Bank Y per annum = $8,700
As you can see from the basic example above, Bank X was the better option for Jim!
Using a mortgage broker may seem like the short cut for shopping around but, behind the scenes, many mortgage brokers are not as “independent” as you may first assume. As a general rule they will “compare thousands of loan products to find the right one for you” but they’ll also have “mates rates” and deals worked out with specific lending institutions. This means that the comparison of hundreds of loan options may happen but they’re all geared up to sell you the best deal for their own business, from the outset. It certainly pays to shop around for your mortgage broker too.
Lenders Mortgage Insurance
Most lenders will require Lenders Mortgage Insurance (LMI) if your deposit is under 20% of the total value of the loan. What does this mean? The lender will add the shortfall of the 20% deposit onto the overall loan amount. Let’s go back to Jim’s situation explained earlier.
If Jim had a 10% deposit for a $250,000, this equates to $25,000 of savings. As there is a shortfall of $25,000, in some cases, the lender will still provide you with a mortgage, but add the $25,000 onto the loan amount. This means, Jim’s loan will be $225,000 in lieu of $200,000.
Over the term of your loan, the interest on the additional $25,000 adds up considerably. If you can get a 20% deposit together, it means huge long-term savings.
Building and Pest Insurance
Queensland’s abundance of building challenges and pests means an abundance of building and pest inspectors. Inspections vary greatly in price and quality. Cheap and cheerful building and pest inspections start at about $500 and give a basic overview of the state of the property. They tend to contain watertight terms and conditions so if they miss something, you’re on your own! Unlike built up urban areas in central Sydney and Melbourne, Brisbane is regularly subjected to floods, fires and cockroaches of the gigantic flying species! Queensland’s humidity and dryness, drought and floods (often all in the same year) makes your building and pest inspection a higher priority than it may be in other locations. Note: If you are buying a property with a pool, you’ll need a separate inspection for the pool itself. While pool fencing is covered on a standard inspection, the integrity and quality of the pool build is not.
Happy buying!