What Does Your Loan Cost You?

Let’s say that you want to buy a $500,000 property. That means you only need to raise a deposit, which could be as little as $50,000, right?

This is the first thing that pops up to many investors’ minds when they look at the cost of the property they want to buy. But when they think a bit harder, they realise that there are so many additional costs involved.

It’s like buying a property thinking that you’ll only have to touch it up a bit. But the closer you look, more and more issues start showing up. At one point, you realise that the property requires a ton of work.

Of course, seasoned investors already know how this works very well.

Rookies, on the other hand, often overlook many costs associated with taking out a loan and purchasing a property. 

So what are those additional costs that you’ll have to take into account?

First, you have your general acquisition costs. These include stamp duty, legal costs, and inspection costs, to name a few.

As far as stamp duty goes, you should know that it varies from one state to another. This is why it’s crucial that you research your chosen state and enter the correct one on your application. Otherwise, you might run into trouble or overpay the stamp duty.

As for legal and inspection costs, it’s best that you talk to your lawyer or solicitor about them. You can call them and say that you’re thinking of buying a property for XXX dollars, and you need an estimate based on that valuation.

Aside from the acquisition costs, you’ll often face application fees. It’s vital that you get these fees in writing so that you know exactly what to expect. 

You may also have to pay the valuation fees, which can vary greatly. Some banks will do the valuation for free, while others will provide you with a list of valuers to reach out to. 

When you do, bear in mind that the fees can be way above what you should pay. Some valuers are very busy, so they jack up the prices simply because they don’t want to take on more work. 

The next thing you’ll have to check is the interest rate, coupled with the banks’ fees. When you do, make sure to compare loans like apples for apples. Sometimes, the way the loan gets presented doesn’t really paint the right picture, so you might end up overpaying down the line.

For example, you might find an interest-only loan at a rate of 4.7%. In some cases, it would be better to go with a loan that comes at 5%. This may be the case if the latter loan has much lower fees.

Furthermore, some banks have ongoing monthly fees. These can add up to a hefty sum of money in the long run.

This is why it pays to bring in a broker and work with them. A good broker can crunch the numbers for you and show you a better option. You’ll be sure that you’re choosing the right one without having to struggle with doing all sorts of calculations.

Generally speaking, the best way to see how much your loan will cost you is also the simplest:

Just ask.

Reach out to a banker or broker and tell them that you want to take out a loan. Then, ask them to put all associated costs in writing and give the information to you.

Don’t underestimate the power that even the slightest of changes in fees and costs can have. Over time, you might either waste or save a ton of money, depending on how you do your research.

To learn more about the fees you might face when getting a loan, check out my webinar.