Expenses You Should Save for When Buying a Home
Buying a house is a significant milestone and probably the single largest purchase many people will make in their lifetime. While many mortgage providers, including JN Bank, finance up to 95 per cent or even 100 per cent of the purchase price, there are other fees and incidentals that you will need to pay upfront, which could amount to a hefty sum.
In many instances, you may need to find as much as 25 per cent of the purchase price of the house. That is why saving towards buying a house is extremely useful in covering these costs and makes your home-buying experience a more pleasant and seamless one.
Here is a breakdown of the fees that you should save towards when preparing to purchase your dream home:
Among the associated fees is the deposit or down payment, which is normally required by vendors upfront. If you’re interested in purchasing a home for $11 million, for example, which falls in the mid-income market segment, you’ll need to come up with a deposit of at least five per cent, or approximately $550,000, while some vendors request as much as ten per cent of the purchase price.
Closing Costs, Valuation and Escalation Fees, etc.
Additional fees to contemplate include the closing costs, valuation, escalation fees and legal costs.
Some buyers are aware of the deposit, but many are unaware that they will also need cash upfront to cover the cost of a series of professional and other fees. These costs include approximately three to five per cent for the closing costs, valuation is based on the valuator’s price and five or ten per cent for escalation fees.
There are also other costs that may arise, depending on the type of property you’re buying, such as a structural engineer’s report, should your mortgage provider require one to validate the integrity of the home you’re purchasing, depending on its age. You may also need to have a plumber and electrician check the property to ensure the plumbing and wiring are also sound.
Legal Fees and Sales Agreement
Then, there are also: the legal fees; transfer tax and stamp duty, which could amount to an additional four per cent of the going purchase price.The purchaser also has to pay the seller’s attorney to draft the sales agreement and this cost is usually non-refundable.
On that basis, someone purchasing a home valued at $11 million, could be required to pay about $2.75 million at five per cent for the deposit; or $3.3 million at 10 per cent for the deposit, when taking into consideration all the associated costs.