Beyond the Fine Print: The Deep Hidden Costs of a Mortgage

Guest Post Submitted by Tomorrow Finance – Home Loan Comparison for Australians

When considering the expenses related to the home loan process, most borrowers focus their attention on mortgage rates and expected fortnightly or monthly repayment amounts. More aware borrowers will also take note of some of the hidden costs that are part of mortgage completion, such as the application and valuation fees, lenders mortgage insurance, conveyance charges and stamp duties.

But there are other expenses related to mortgages that the vast majority of borrowers overlook, largely because they often aren’t part of the mortgage contract itself. These are costs that are necessarily related to a home loan and the physical purchase and habitation of a new home, but may not technically be formal mortgage requirements. Nevertheless, these expenses need to be accounted for when budgeting for the mortgage process to obtain a full and accurate picture of the expense involved in securing a mortgage and purchasing a home.

Home and Contents Insurance

One expense that is almost always formally required as part of the mortgage process is home insurance. Essentially all homeowners are required to have home insurance as part of the home loan process. The choice of carrier is up to you. It’s extremely important to carry enough home insurance coverage to deal with a worst case scenario because if your home ever needs to be rebuilt, the direct and indirect costs of doing so are considerable. Expenses can extend beyond the actual rebuilding process and include living costs you will incur if your home is damaged to the point that it can’t be lived in.

While home and content insurance are almost always offered as a bundle, they represent distinct types of coverage and involve technically separate policies. Home insurance covers the building itself; contents insurance covers the belongings within the home.

Home and Building Inspection Fees

Inspection of the property—to check the integrity of the infrastructure and to guard against the potential for pest infestation—is a good idea when planning to purchase a home. Fees vary depending upon the thoroughness of the inspection and the size of the property.

Life Insurance/Income Protection

While not a technical requirement to complete a mortgage, life insurance and/or income protection insurance for the primary earner is often considered a good idea for families purchasing a home. This provides a hedge against death or serious illness that would interrupt income flow and prevent a default on the mortgage.

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