What does a loan really cost?
When getting a loan, there are costs and fees involved. These can be direct loan costs or costs incurred as part of the process.
Inherent Costs
These are costs that are incurred not related to the loan itself which a client would need sufficient funds for:
Conveyancer Costs: This is a requirement for property purchases as you would need a conveyancer to review the contract, negotiate on your behalf on key items such as finance clause dates & deposit exchange amounts, as well as to represent you at settlement. The costs are dependent on the conveyancer and is expected to range $1,500 - $3,000.
Real Estate Agent Costs: This is a cost if you are the seller and is normally paid from settlement proceeds as a percentage of the sale price.
Buyer Agent Costs: This is a cost if you engage a buyer agency and is generally either a percentage of the sale price or a fixed fee.
Direct Costs
These are costs that are incurred as a direct result of the loan. They include:
Legal Fees: These are the costs incurred for the bank’s lawyers and are costs such as preparing and reviewing loan documents.
Title Fees: This is the cost to transfer the land title and is generally $200 - $300 per title.
Valuation Fees: This is a cost more prevalent in the non-bank segment & commercial lending and is the cost for a valuer to perform an onsite valuation of the property
Establishment Fees: This is the cost to establish the loan and varies per bank, or loan type. They can come as a flat fee or as a percentage of the loan amount.
Ongoing Fees: This is the cost to maintain your loan account and is common in a diverse range of loans, such as packaged home loan annual fees, non-bank home loans, commercial loans and unsecured loans.
Brokerage Fees: This is the cost if you are going through a broker and is dependent on the broker. Examples include business brokers for business acquisitions or additional mortgage broker mandate fees depending on the scope of work required.
The majority of these costs are generally inbuilt into the loan itself, and can be paid out when payable (valuation fees etc.) or from settlement proceeds etc.
Post Settlement Costs/Requirements
These are costs/requirements that may be required after you have completed the loan process and is dependent on the loan purpose etc. Examples include:
Cash buffers and establishing utilities after purchasing a property, such as water, gas, electricity, internet etc.
Additional cash for furniture after purchasing a property.
Cash buffers for wages, staff, cost of goods etc. if you are purchasing a business.
Property Management expenses and setup if you are purchasing an investment property. These are a wide range of fees depending on the requirements such as management, cleaning, advertisement, lockbox etc.
Renovation and DA expenses if you intend to develop the property after purchasing it.
As such, it is important that you are aware and factor all applicable costs when attaining a loan. At Loan Central Hub, we are experts in all loan types, allowing you to navigate through finance and your property journey with confidence.
