A new house is an expensive purchase – everyone knows that, but there are additional costs associated with purchasing a property that buyers sometimes overlook. Purchasers, especially first home buyers, are usually on a tight budget so it is really important that they are aware of all the potential costs so that they can plan accordingly.
Some of the hidden costs of purchasing a house include:
1. LIM Report
A Land Information Memorandum or LIM report can be obtained from the relevant city council, the price varies depending on the council and the urgency but is generally between $250 to $400. It is an important condition to include in sale and purchase agreements as a LIM report contains all the information the council has on file for the property including resource and building consents, zoning and more.
2. Builders Report
When purchasing a house worth hundreds of thousands of dollars, one should obtain a building inspection report to ensure the property is structurally sound and weather tight. A report obtained from a qualified building inspector will cost in the region of $400 to $800 depending on the size of the house.
3. LMI and Loan Application Fees
Some banks charge loan application fees of around $400. Also if you are borrowing more than 80% of the value of the property the lender is likely to charge a Lenders Mortgage Insurance Premium (LMI) fee which varies depending on the perceived risk and amount you are borrowing. This is often added to the amount you are borrowing so you don’t have to come up with the funds upfront.
4. Conveyancing Fees
With the Conveyancing Shop’s affordable fixed price service you can be assured of no nasty surprises when you get our bill. For a standard residential purchase we charge $880 plus GST and LINZ registration costs.
5. Other Legal Considerations
It’s a good time to look at Asset Protection and possibly setting up a trust to own your new property. You may also wish to consider entering into a relationship property agreement (pre-nuptial agreement) or update your Wills. The cost of this would be dependent on your personal requirements, but if you give us a call on 09 638 6969 we can give you a quote tailored to your needs.
6. Property Rates
As a property owner you are responsible for paying city and regional council rates. These vary depending on the value of the property and region but for a typical property in the Auckland suburbs expect to pay $1500 to $3000 to the City Council and a few hundred to the Regional Council. When you purchase a property the rates are apportioned so you will have to pay the Vendors for any rates they have paid in advance.
7. Moving Costs
You will probably need a moving company to transport your furniture and belongings to your new home. Most moving companies charge by the hour so don’t book your movers for first thing in the morning on settlement day as the actual settlement may only take place in the afternoon and you don’t want to pay the movers to sit in their truck and wait!
8. Property Insurance
A requirement of all mortgages is that you have replacement insurance on the property. It would be wise to also consider contents insurance and life, income or mortgage protection insurance. These are all well worth while but could set you back several hundreds of dollars.
9. Connection fees
You will need to open electricity, gas, phone, broadband (or if your lucky fibre optic!) sky accounts and other subscriptions for your new home. Connection fees for these can add up to over $1000!
10. Registered Valuation
Another common unexpected cost is a registered valuation which is often required by the bank in order to get finance approval. This usually costs upwards of $400 depending on the size of the property.
11. Cleaning Costs
Many people like to get the carpets steam cleaned or sometimes the entire property commercially cleaned before moving in. There is nothing nicer than moving into a spotlessly clean new home (and nothing worse than finding the Vendor has left it in a terrible state!). If you want to avoid having to clean the house yourself you can put a clause in the Sale and Purchasing Agreement stating that the Vendor has to get the property commercially cleaned on settlement day.
12. Contingency Fund for Property Purchases
Have a contingency fund for unexpected expenses. There will always be something you need for the new house so it pays to keep some money aside for miscellaneous expenses.