There’s more to buying a house than meets the eye. It can help to tally up all the costs of home-buying before you start.
Costs of Home Buying for First home buyers can sometimes get a shock when they add up all the costs and discover that buying
a house can be so expensive. And we’re not just talking about the price of the property, either.
We’re talking about all the other costs of home buying, like stamp duty, conveyancing fees, and more.
Generally, you’ll need to pay for these yourself – often from the money you’ve saved up for a deposit. If
you don’t factor in these costs, your deposit may end up being smaller than you think.
So what exactly are the costs? Here are the most common ones you may encounter.
Stamp duty – also known as transfer of land duty – is a tax you may have to pay when you buy property.
Each state and territory in Australia has its own rules for calculating stamp duty – and some are more
complex than others.
For Australian residents, stamp duty could be up to 7% of the purchase price. The exact amount depends
on a number of factors, including the location of the property and whether you’re eligible for any
concessions or exemptions.
Stamp duty could cost you hundreds of dollars – or it could cost tens of thousands. There are too many
variables to pin a figure on it here. As a First Home Buyer, you may be eligible for stamp duty
concessions – but rules vary depending on the state or territory.
Conveyancing or legal fees
When you buy a house, you may want to engage a conveyancer or solicitor to look after the preparation
and completion of all the documents – like the mortgage and transfer of ownership and settlement.
Things can get complex – and these specialists can help settlement happen smoothly.
Home and contents insurance
It could be a good idea to make sure that your new home is insured from the moment of settlement
happens (or ideally before this). What if an electrical fire destroys the house on the day you’re meant to
move in, leaving you with nothing but a home loan debt?
Insurance is meant to cover you in the event of loss or damage to your home. It could be well worth the
cost – if for no other reason than peace of mind. In fact, some lenders may require you to have home
insurance before settlement happens.
Insurance costs can vary depending on the location, type of property, type of policy cover, and more. You
could expect to pay anything from hundreds of dollars to over $1,000 for an annual policy.
It’s one thing to go to a home open and notice a few cracks in the wall. It’s another thing entirely to get a
professional to crawl around under the house and identify the causes of those cracks.
A building inspection could give you peace of mind that the property of your dreams is structurally sound.
A pest inspection could also be valuable.
Prices can vary from business to business. You may be able to get a building and pest inspection done
for under $1,000, but don’t expect too much in change.
Loan application fees
Some lenders ask you to pay an upfront fee when you apply for a home loan. However, you may be able
to get this fee waived.
Don’t forget to factor in the cost of moving into your new home! If you need to enlist the help of
removalists, this could add hundreds of dollars to your costs – or perhaps even thousands in some
Lenders mortgage insurance
Generally, unless you have saved up a deposit of at least 20% of the lender-assessed value of the
property, you may need to pay for Lenders Mortgage Insurance (LMI).
The amount of LMI you may have to pay can depend on your LVR and the amount of money you borrow.
Different lenders and insurers have different rates for calculating LMI. When you are talking to lenders
about home loans, you could ask them for an estimate.
As a very rough guide, LMI could cost over $10,000 on a home loan of $500,000 for which you have
saved a $50,000 deposit.
To sum up
- There are a number of fees and costs you’ll need to factor in when planning to buy a home.
- Common costs associated with buying a house include:
- stamp duty (land transfer duty)
- building and pest inspections
- home and contents insurance
- loan application fees
- moving costs.