Avoid these 5 costly home loan fee mistakes in Richmond

When you're buying a home in Richmond, understanding all the costs involved in your home loan application can make a significant difference to your budget. Beyond the property price and your deposit, there are various fees and charges that can catch first-time buyers off guard.

As your local mortgage broking team at Premier Path Finance, we often see Richmond clients surprised by hidden costs that could have been planned for or even avoided. Let's break down the main expenses you'll encounter when applying for a home loan.

Understanding Your Interest Rate Structure

Your home loan interest rate is obviously the biggest ongoing cost you'll face. When exploring Home Loan options, you'll need to choose between a variable interest rate or fixed interest rate home loan.

Variable home loan rates fluctuate with market conditions, which means your repayments can go up or down. Many lenders offer interest rate discounts on variable loans, particularly if you meet certain criteria like maintaining a minimum loan amount or using an offset account.

Fixed interest rate options provide certainty for your budgeting, as your repayments remain the same for the fixed period. When calculating home loan repayments, consider both scenarios and how they fit your financial situation.

Lenders Mortgage Insurance (LMI) - A Major Upfront Cost

If your deposit is less than 20% of the property value, you'll likely need to pay lenders mortgage insurance (LMI). This protects the lender if you can't meet your repayments, but it's an additional cost you'll need to cover.

LMI is calculated based on your loan to value ratio (LVR). The higher your LVR, the more you'll pay. For example, on a $600,000 Richmond property with a 10% deposit, LMI could cost anywhere from $15,000 to $25,000 depending on your lender.

Some ways to manage LMI costs include:

• Saving a larger deposit to reduce your LVR
• Looking into lenders who offer reduced LMI rates
• Considering family guarantee options that might eliminate LMI

Application and Establishment Fees

Most lenders charge fees for processing your Home Loan application and establishing your loan. These typically include:

• Application fees: Usually range from $300 to $800
• Establishment fees: Can be anywhere from $500 to $1,500
• Valuation fees: Generally $300 to $600, depending on your property type
• Legal and settlement fees: Vary by state but expect $1,000 to $2,000

Many lenders now offer a streamlined application process that can reduce some of these costs. When you access Home Loan options from banks and lenders across Australia through a broker, you can compare which institutions waive certain fees.

Government Charges and Stamp Duty

Stamp duty is a state government charge that varies significantly depending on your property's value and your circumstances. In Victoria, first home buyers may be eligible for stamp duty concessions or exemptions.

Other government charges include:

• Transfer fees
• Registration fees
• Title search fees

These costs are often overlooked when budgeting for your home purchase but can add several thousand dollars to your settlement costs.

Ongoing Account Fees and Charges

Once your loan is established, you'll face ongoing fees that can impact your borrowing capacity calculations. Common ongoing charges include:

• Monthly account keeping fees ($10-$20 per month)
• Annual package fees for premium loan products
• Offset account fees (though many are now fee-free)
• Extra repayment fees on some fixed rate loans

Tips for Managing Home Loan Costs

When going through the application process, there are several strategies to minimise your loan costs:

1. Get pre-approved: Home Loan pre-approval helps you understand your borrowing capacity and can speed up the settlement process

2. Compare comprehensively: Don't just look at the home loan interest rate - consider all fees and charges

3. Leverage home equity: If you're refinancing or buying an investment property, using existing home equity can improve your LVR

4. Prepare thorough documentation: Having your bank statements and financial documents ready can help avoid delays and additional processing fees

5. Consider the total package: Some lenders offer fee waivers or discounts when you take multiple products

Working with Richmond's Property Market

Richmond's property market has unique characteristics that can affect your loan costs. Higher property values might push you into different LMI brackets, while strong market conditions could influence valuation outcomes.

When you apply for a home loan in Richmond, working with a local mortgage broker who understands the area's property market dynamics can help you anticipate and plan for all associated costs.

Understanding all the costs involved in your home loan - from interest rates to establishment fees to ongoing charges - puts you in a stronger position to make informed decisions about your Richmond property purchase. By planning for these expenses upfront, you can avoid budget surprises and focus on finding the right home loan structure for your needs.

Call one of our team or book an appointment at a time that works for you to discuss how we can help you understand and minimise your home loan costs.