Here are some of the extra costs that you’ll need to consider when you take out a home loan.

Home loan application fees

Most lenders charge a home loan application fee. The fee will depend on the loan you are applying for and the lender.

Home loan application fees cover:

•   loan contracts

•   property title checks

•   credit checks

•   attending a settlement.

Mortgage fees and costs

•   Mortgage establishment fees – lenders generally charge a mortgage establishment fee, which is a fee for setting up a mortgage.

•   Property valuation fee – a third party chosen by the lender, is appointed to determine the value of your land and improvements.

•   Mortgage registration – your mortgage deed needs to be registered with the government. Some State Governments charge stamp duty to register your mortgage.

•   Lenders Mortgage Insurance – if you don’t have 20% of the purchase price or the value of the property, the lender will require you to pay for a lenders mortgage insurance policy that covers their risk in the event you default on your repayments.

Property fees and costs

•   Building, pest and electrical inspection fees – it’s wise to have your property inspected for any structural or electrical problems and for pests.

•   Registration of transfer fee – the new owner of the property needs to be registered at the land titles office.

•   Legal fees – you generally need to pay a solicitor or settlement agent to handle the transfer of ownership of the property on your behalf.

•   Home and contents insurance – most homeowners insure their home and contents against a range of threats, such as burglary, fire, storm, etc. Lenders insist that your property is insured while you have a mortgage.

•   Life and income protection insurance – borrowers should consider protecting their incomes and themselves while they have a mortgage.

•   Utility costs – connecting electricity, gas and telephone can attract a fee.

•   Council rates – your local council charges rates to cover garbage collection and a host of other services.

•   Water rates – the water corporation charges rates for the supply and upkeep of water to your property.

•   Strata / body corporate fees – if you buy an apartment or strata titled property, body corporate fees are charged, and some fees can be significant, particularly if the building is in need of a major work, or if there are lifts, pools and other communal facilities.

•   Maintenance costs – don’t forget to make provision for regular maintenance on your home, even if you decide not to undertake significant renovation.

In fact, location has a great deal to do with the success of your investment property if you will be renting it as a holiday destination.

While it would be great to have a holiday-home investment where you would prefer to travel to, when investing it’s important to also consider what locations and niche markets have good rental returns.

You need to make sure that your property location matches up with market demand. Things to consider are travel time and expense, rent rates, local attractions and activities – particularly those available year-round, not just in peak times.

For example, busier coastal suburbs may offer more consistent rental returns than quieter peripheral suburbs that may be popular only in peak holiday seasons.

Deciding whether the investment holiday property you want will be as lucrative as you think often requires the advice of an expert, particularly for investors who aren’t as familiar with the area as residents may be, so investors would be well served to seek advice instead of taking a gamble.

Finance broker

Brokers act as a liaison between you and the lender. They will find out about your finances and your property goals, and search for and negotiate a loan product that matches your needs. Not only will they do the legwork and ensure your loan is processed as smoothly as possible, but they are there to guide you throughout the entire process.

Real estate agent

Unless you’re working with a private vendor, meeting a real estate agent is inevitable when it comes to purchasing a property.

Hired by the vendor, or seller, the real estate agent’s role is to advise the vendor on preparing the property for sale, market and communicate about the property, and negotiate with potential buyers.

Insurance companies

A property purchase is a high-value purchase and long-term financial commitment making risk management vital. Insurance, including mortgage protection and property insurance, will help you avoid being hit with a major financial burden should anything not go according to plan. Many finance brokers can deal with insurance as well or will recommend an insurance broker who can.

Conveyancer

The legal aspect of a property purchase is taken care of by a licensed and qualified conveyancer. If they are a solicitor, they can also provide legal advice.

Their role is to prepare the documents to ensure that transfer of ownership of the property has met the legal requirements in your state or territory.

Property valuer

Knowing the value of a property is essential in a loan application, so a valuer can play a huge role in the property buying process. A lender will often engage an impartial valuer to ensure that the buyer and the lender will know what loan amount may be warranted. The value is based on the property and location, as well as the current market.

Pest and building inspectors

Without the services of pest and building inspectors, a homebuyer’s worst nightmare – finding out the property they have bought requires costly renovations or pest treatment – may come true. Organising a pre-purchase inspection is essential.

If the property requires structural, wiring or repair work, these inspections can stop you from making a costly mistake or, if the property is still your dream home but just needs a little work, can provide a valuable bargaining chip.

Lenders

If you need to borrow money to make your purchase, you will need a lender, whether it’s a major bank, a second-tier or non-major, or a specialist lender for more difficult funding proposals.

Fixed rate terms last for a set period of time that is prearranged between you and your lender. Fixed rate periods last between one and five years.

When your fixed rate term ends, your loan will usually revert automatically to the standard variable interest rate unless you have provided instructions to refix your loan.

As the end of your fixed rate term approaches, it’s important to plan ahead and talk to your mortgage broker about what your new, or roll-off, interest rate and repayments might be and what your options are.

Repricing with your current lender

Lenders may not apply the lowest interest rate they offer when a loan reverts to a variable rate.

But, you can ask for a reprice to a more competitive rate. If you do find a more competitive rate with a different lender, you could also ask your current lender if they can match it.

Refinancing to a different lender

Once your fixed rate term ends, you may be able to refinance to a different lender.

While the interest rate is a key factor when choosing a loan product, it’s important to know the ‘true cost of switching’.

You may see tempting cashback offers from lenders, or lower rates advertised, but there are a myriad of fees and charges involved in setting up a new loan that you will need to consider.

If your loan-to-value ratio (LVR) is above a certain limit – usually 80% LVR – you may be required to pay Lenders Mortgage Insurance if your refinance.

We can help you understand what it will actually cost you to change lenders, and how much you could save.

Refinancing involves reviewing your current mortgage, and potentially swapping your loan to another lender, who can better meet your current needs, wants and circumstances.

Refinancing can be a strategy to secure a lower interest rate, switch to a different type of loan and can also allow you to consolidate your debts or pay down your mortgage more quickly.

Another common reason borrowers look to refinance is to access equity – the amount you'd get from selling your home after settling any associated loans and any other costs associated with the property.

However, refinancing isn’t suitable for everyone. There are many different factors you’ll need to consider when thinking about refinancing a loan.

So how will you know that refinancing is the right option for you?

The first step is to speak to a professional, such as a mortgage broker, about your needs, objectives, current financial situation and whether you can afford a different loan structure, particularly if you have more than one property.

Are you looking to pay less interest?

If your purpose of refinancing is to aim for a lower interest rate, this could potentially save you a lot of money in the long-term.

While saving money is often one of the biggest benefits of refinancing, it may not be as straightforward as that and careful consideration is required.

Sometimes refinancing may only save you a small amount per year, particularly when you take into consideration any exit costs, application fees and taxes involved. Refinancing may also not offer benefits if the loan will attract Lenders Mortgage Insurance (LMI) or features like an offset account aren’t offered with the new loan.

However, if it’s going to save upwards of $1,000 a year, refinancing might be a sensible approach.

At this point, the broker will need to find out about your existing loan, repayments and current loan structure.

Your mortgage broker will also need to find out more about your current financial situation, including your income, any other current debts and about any assets you own.

The current value of the property is also taken into consideration, your broker will have access to current data that will indicate what your property is likely to be worth.

The broker will then review the various loan options and figure out whether it’s worth it for you to refinance.

Your mortgage broker can tell you if getting a lower interest rate from your current lender can be achieved without refinancing.

Do you want to change your loan type?

Refinancing may allow you to change to a different loan type, for example switching from a variable loan to an interest only loan.

If you do decide to go down the refinancing path, working with a broker rather than going straight to a lender has advantages.

Brokers generally have access to loan options from a range of different lenders and if there’s a better opportunity for you, they’re usually able to access it.

Do you want to consolidate your debts?

If you want to refinance to lower lending costs to help you manage your monthly repayments, speak to your mortgage broker who can negotiate with your current lender for a rate suitable to your current situation.

Your broker can also help you look at alternative options to consolidate your personal loans and credit cards into the one loan. This could help you in lowering your monthly repayments, or help you keep your repayments on time, and even save you interest in the long term.