If you’re new to the house buying game, you can be forgiven for thinking the only costs involved are the deposit and the mortgage. But unfortunately, there are hidden costs of buying a home that can catch you off guard if you don’t do your homework.
Comparing the loans available to first home buyers is an essential part of the process. But get your pen and paper ready, because there are a lot more to add to your home-buying checklist.
Firstly, there’s the cost of obtaining a Land Information Memorandum (LIM) from the local council, plus cash for a building report. You’ll also need to pay for a registered property valuation and your legal fees. Together, they can add thousands of dollars to the cost of buying a home.
What is a building report and do I really need one?
A building report is your safeguard against buying a lemon. It’s a non-negotiable cost in the house selection process. The last thing you want to do is pour your hard-earned cash into a house with hidden defects.
The Real Estate Agents Authority (REAA) recommends that buyers pay for a property inspector. A qualified inspector will be able to tell you about the condition of the property.
This is an extra cost to factor in when buying a property. But it could save you a lot of money down the track if it prevents you from buying a leaky home, for example.
REAA recommends you find an inspector and/or engineer early in the process, so you can arrange an inspection when you find a property that you want to buy.
The authority also advises that house buyers choose a property inspector who has professional indemnity insurance and carries out work according to the New Zealand Property Inspection Standards. The standards set out requirements for all pre-purchase property inspections.
Building report costs:
From around $400 to $1500 for average family homes, depending on the size of the property and how thorough/professional your choice of inspector.
What is a LIM and do I need to buy one?
A council’s LIM report is a record of information on a property. It includes standard information, such as rates and building consents. It contain details about risks such as erosion, contamination, drainage, landslips and flooding.
A LIM can also alert you to illegal works on the house, or the fact that it might leak. You can order a LIM through the local council or through a lawyer.
Buyer beware: The vendor or their real estate agent might provide a LIM report for no charge. However, if the LIM is not current, it might not reveal new problems. If the LIM is more than a few weeks old, then it’s recommended you obtain your own copy.
If the LIM is out-of-date, you may not be able to rely on it in court proceedings if you (or your lawyer) did not obtain it yourself.
LIM report costs:
Auckland Council charges $307 for a standard LIM application (10 working days) and $415 for a fast-tracked report (three working days). Wellington Council charges $333.25 and $499.50, respectively. Nationally, prices range from approx $250 to $500.
Why do I need to pay for a lawyer/conveyancer?
Lawyers and conveyancers are skilled at finding problems in sales contracts and property titles. They also deal with all the complicated legal paperwork involved with the home-buying process. Whether you’re buying privately or though an agent, you’ll need to pay for their expert services.
Legal fee costs:
Legal fees can range from a few hundred dollars into the thousands. It all depends on the type of property you’re purchasing and the processes your transaction requires.
Whether you choose a lawyer or a conveyancer, ensure you discuss your needs and their fees up-front. You can search for property lawyers at the website of The Property Law Section, which is part of the New Zealand Law Society. Or at the website of The NZ Society of Conveyancers.
Other costs associated with buying a house:
- Lenders mortgage insurance (LMI): home buyers with deposits of less than 20% often have to pay LMI premiums, which are usually added to the loan.
- Appliances: unless they’re listed in the sale, buyers may need to buy new appliances, such as washing machines and driers, for their new home.
- Rates: buyers need to budget for water and council rates.
- Utility connection fees: utility companies usually charge connection fees.
- Moving expenses: even the cost of two men and a van can add up, especially if multiple journeys are required.
- Repairs and maintenance: as a rule of thumb, putting aside the equivalent of 10% of your mortgage payments should be enough to cover most eventualities.
- Home insurance: mortgage lenders make it compulsory for homeowners to take out house insurance.
- Your time: the home-buying process can be long and exhausting. It can involve whole weekends driving around open homes, time off from work and lost income.
Canstar is here to help
When it comes to buying a house, it’s important to be realistic about your budget and the true costs of home ownership. And that includes thoroughly researching the best mortgage deals in the market. So to read more about our five-star home loan awards click here, or to compare rates using our free mortgage comparison tool hit this button:
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