Building insurance helps to cover the cost of replacing a home if it’s destroyed, or the cost of repairing damage to the physical structures of a property.
Building insurance usually covers permanent fixtures and fittings such as inbuilt kitchens, garages/sheds and fences from events such as fire, flooding (specific causes), storm, impact (e.g. from a car accident or falling tree), explosion, riot, vandalism and earthquake.
More comprehensive building insurance policies may extend to cover the property owner for legal liability (compensatory costs in the event that someone is injured while on the property), emergency repairs, counselling services, clean up fees, temporary accommodation, building modifications and funeral expenses.
Certificate of Title
A Certificate of Title is a legal document which identifies the owner and any encumbrances or easements associated with a particular parcel of land. Each time ownership of a property changes, the Certificate of Title is amended to reflect new ownership.
A comparison rate is designed to help you understand the overall cost of a home loan, including fees and charges from the lender.
For example, a 3.50% interest rate at Lender A with high fees has a comparison rate of 3.85%. Lender B’s higher interest rate of 3.65% with lower fees has a comparison rate of 3.75%. This means Lender B is the cheaper option even though the interest rate is higher.
It is important to bear in mind that the comparison rate will be based upon a standard set of criteria which might not align with your circumstances.
Contents insurance helps to cover the cost of replacing the things that you own that normally are inside of your house if they are damaged, stolen, or lost. This can include electrical items, furniture, clothes, sporting equipment and jewellery.
If you are a homeowner you may combine your building and contents insurance into one, known as home and contents insurance.
Conveyancing charges cover the transfer of property’s title from the vendor (seller) to you. Conveyancing charges are usually estimated by the conveyancer and can range between $500 and $2,000.
The cooling-off period is the final stage of buying a home in which you can withdraw from the purchase of the property without legal or significant financial implications, even after signing the contract. Cooling-off periods are usually only available to buyers (not sellers) and are designed to protect them in case last minute issues arise. Reasons for withdrawing may include:
- not being granted finance approval by your lender
- an unsatisfactory building inspection report
- a change in personal finance (e.g. unemployment)
- you become aware of local development that will impact the liveability or value of the property negatively
- a property you'd prefer to buy becomes available.
Cooling off periods don't apply to property purchase made by auction.
Buying through HomeSeeker SA involves a ‘first-in-line’ process.
To be in line to purchase a property you need to provide the real estate agent with proof of finance pre-approval so they can add you to the list of interested buyers (in order of contacting the agent).
The agent will send a Declaration of Eligibility to the first person on the list who registers their interest in a property, and they have five days to complete the declaration and return it. If it is not returned within five days, the agent will contact the next person on the list of interested buyers.
This typically means that the most desirable properties in sought-after locations will be in high demand and sell quickly. It is not unusual for properties to secure a first-in-line buyer within minutes of being listed on the HomeSeeker SA website.
To be first in line to register interest in a property we recommend you:
- sign up to HomeSeeker SA, save your favourite searches and opt in to receive an email soon after new properties that meet your saved search criteria are listed
- keep your borrowing information up-to-date, including a current and valid finance pre-approval letter from your lender.
Lands Title Office fees
The Land Title Office (LTO) collects a fee for registering the lenders mortgage on the title record for the property.
Lenders Mortgage Insurance
Lenders Mortgage Insurance (LMI) protects the lender if you can't make the loan repayments and the lender can't recover the loan balance.
Keep in mind that an LMI insurer who pays the lender under an LMI policy can then come to you, the borrower, to repay the sum directly to it. LMI protects the lender, not you or a guarantor.
If your loan to value ratio is above 80%, you usually have to pay a once-off fee to cover the cost of LMI for your lender. You can pay this fee on settlement or add it to the loan. If you add the LMI fee to your loan, interest will be charged when you repay it.
Loan establishment fee
Establishment or application fees are typically charged by the lender to cover the cost of documentation of the new mortgage. This is a one-off payment of around $200-$700 (depending on the loan), though many lenders waive establishment fees on particular products or for special promotions. Depending on the product, the lender might also charge annual fees and monthly service fees.
Loan to value ratio
The bigger your deposit, the lower your loan to value ratio (LVR). Your LVR is the amount of the loan divided by the purchase price (or appraised value) of the property. For example, if you're buying a house valued at $400,000 and you have a $300,000 loan, your LVR would be 75%.
Official cash rate
Official cash rate (OCR) is the rate of interest that the Reserve Bank of Australia (RBA) charges on its overnight loans and advances to commercial banks (e.g. Commonwealth Bank, Westpac, ANZ). OCR influences the cost of borrowing money and allows the Reserve Bank to influence the level of economic activity and inflation. When OCR decreases, home loan interest rates will often drop too, although various factors may impact interest rates.
Pre-approval is a lender's indication they may be willing to lend you a certain amount of money. Pre-approval is usually subject to certain conditions being met and can also be called conditional approval.
Property inspection fee
If you are getting serious about buying a property and want to be certain the building is in an acceptable condition, there are reputable companies that offer pest and building inspections for around $300 to $500. An online search for ‘pre-purchase building inspection’ will present you some options.
A rental bond (also known as a residential bond) is an upfront payment made by the tenant before moving into a rental property. The landlord must lodge it with Consumer and Business Services (a receipt is given to the tenant), and, at the end of the lease, it is returned to the tenant if there are no claims for outstanding rent, damage, cleaning, or other costs.
A rental profile allows you to store all of your tenant data in one place to share electronically with property managers and landlords instead of having to supply it every time you apply for a rental property. Different real estate agents and property managers use different types of rental profiles. The most commonly used is 1form, as used on realestate.com.au, and by agencies such as L J Hooker, Harcourts, First National and Raine & Horne. Sign up for 1form.
A rooming house is a residential property managed by a proprietor (landlord) who makes accommodation available to residents (tenants) on a room-by-room basis. Rooms are available to rent to at least three other people. The sa.gov.au website explains rooming house accommodation in more detail.
Settlement is the process of taking legal possession of the property (i.e. receiving the keys). There are some legal and administrative tasks that must be completed on settlement day which are typically undertaken by your conveyancer.
Stamp duty is a government charge on certain transactions, including real estate. It is charged at either a flat rate or a rate based on the price of the property (i.e. the higher the price the higher the stamp duty).
Refer to RevenueSA for more information that can assist to estimate the amount of stamp duty payable on a property.
A bank valuation is a conservative estimate of the value of the property you are planning to buy. It allows the bank to determine if they could recover the losses associated with the loan, should you be unable to make your repayments.
Lenders can sometimes charge to cover the cost of having your property valued by a third party. The fee can vary depending on the location of the property but typically costs between $100 and $300. Some lenders offer a free valuation.
A printable brochure containing advice from Consumer and Business Services (CBS) about buying or selling a home is available from the CBS website.