Costs involved with Loans

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Costs involved with Loans

Costs involved with LoansStamp Duty

When purchasing a new home there are a lot of other costs to consider above and beyond the purchase price and deposit of your new home. One of the biggest hits to your wallet that you might not be aware of is the stamp duty tax.

Unexpected money surprises are never a good surprise, so here at Australian Credit and Finance we want to explain this tax and how it works so you can accurately calculate your new home costs.


What Is Stamp Duty?

Stamp duty is a general tax imposed upon certain documents and some undocumented purchases. These include title transfers as a result of selling real estate, vehicles, business assets and other property, gifts, insurance policies and home loans, and are paid by the purchaser or borrower. However when you are purchasing a home, it is specifically a stamp duty land tax that you’re required to pay.

Stamp duty land tax is a fee you pay the ATO depending on the value of the property you are purchasing. It is a charge issued by the state or territory, so the amount will vary depending on where you live.

Working out the amount you have to pay can become confusing due to the different approaches by each state, so make sure you have understand what is required based on your specific location. Beyond that, there are concessions for first-time buyers, different rates if you’re buying land and also sometimes a separate mortgage duty to pay.


How Does Stamp Duty Work?

Stamp duty is calculated by applying a sliding scale of taxation, depending on the value of your property. The general rule is that the cheaper the property, the less tax you will be required to pay.

Most states and territories have a system that will slot your property into a pre-determined value category ($100-200,000) and will ask for a lump sum plus an extra amount for every $100 over the lower end of the category, e.g. $100,000.

The Northern Territory, on the other hand, does not employ a classification system as such, but uses a formula to work out the rates of duty, based on the value of the house.

Given the different approaches taken, the best advice is to visit your local tax office for specific advice on your stamp duty requirements, or speak to a mortgage broker who understands the difference rules for each location.

There are also many websites that have calculators that will tell you how much you’ll need to pay out in stamp duty for the house you’re buying.

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How Do I Avoid Stamp Duty?

Unfortunately there is no way to avoid the tax, much like employment taxes, you’re required to make this payment, unless you are a first time home buyer. Every state has a first home buyer concession in place for stamp duty. This is designed to make it easier for people to get their first home. The problem is, they vary quite considerably from location to location, as follows:

  • NSW is probably the most generous state. It has a system in place called the First Home Plus Scheme. Eligible first home buyers pay no transfer or mortgage duty on homes valued up to $500,000, or they can receive a concession on houses valued between $500,000-$600,000. There is no duty paid on land purchase to build a first home, valued up to $300,000, plus a concession on land valued between $300,000 and $450,000.
  • The ACT has a concession scheme for houses less than $330,000 in value. Eligibility depends on the household income, which is staggered depending on the number of children a family has.
  • Western Australia has a concessional rate for houses less than $200,000 in value, but also a first homeowner rate for property valued at less than $350,000 or land valued at less than $200,000.
  • South Australia operates a first home buyer concession asking for no stamp duty on a property valued at less than $80,000 and a staggered reduction in duty on houses up to $130,000 in value.
  • Queensland offers a staggered concession for first homebuyers on houses up to $500,000 in value and land up to $300,000.

So who is eligible for these concessions?

  • Applicants must be a person, not a company or trust
  • Applicants must be a permanent resident or Australian citizen
  • Applicants must be over 18 years of age
  • No co-purchaser may have previously owned a residential property within Australia
  • Must be a principal place of residence for a continuous period of six months.

It’s advisable to contact your local tax office website to gain a quotation for your intended property before getting too far ahead in the home purchase process. It pays to know ahead of time what you might have to pay, depending on the value of your home and the state or territory you’re based in.

Stamp duty tax as well as other costs that are associated with buying a home can be confusing and overwhelming. Call the team at Lloyds Financial Services today who will assist you with your home loans needs and help you through the home buying process.

It’s recommended that you review your mortgage every 12 months so that you can ensure you’re still getting the best low rate finance and low interest finance available. At Lloyds Financial Services

we understand the concept of ‘shopping around’ and encourage our customers to do just that.

Our Home Loan Experts can run a mortgage health check for you over the phone, it’s simple and we can provide you with options on the same day.


Things to Consider When Refinancing

So you’ve decided that you want to refinance in the hopes of getting a better rate. Here’s what you should consider while going through this process:

  • Are you happy with the level of service from your current lender?
  • What type of loan do you need (fixed, variable, interest only etc)
  • What home loan features are important to you?
  • Have your circumstances changed since you got your mortgage?

If you want to get the best rate, there are some things you need to consider in terms of the type of loan you access.


Fixed Interest Rates

A fixed interest rate loan is where you fix your mortgage amount for a set period of time, at a set interest rate.

This type of loan is a good option if you need to know what your outgoings are every month. This is also a good option for you if you need to keep your outgoings the same for a few years, particularly if you’re planning to start a family.


Variable Interest Rates

A variable interest rate loan is based on the floating rate, which is set by the lender. The rate is subject to change and can go up or down.

This type of loan is a good option for you if you want to pay off your home loan faster or you want to fix a portion of your loan amount further down the track.


Interest Only

An interest only loan is just that – you only pay off the interest and not the principal amount. This type of loan is not for the long term, but if you need to free up some cash, paying interest only for a short period of time is a good option as well.

Before you decide to change your current lender, make sure you shop around first. Your current lender could be your best option, but they could also be your worst.

Using a professional service like that provided by Lloyds Financial Services will ensure that you get the best deal available. We have access to a variety of lenders Australia wide, which means that no matter where you’re located, we can get the best deal for you.