The costs of home buying can add up quickly as there is more than just the asking price to consider. You also need to account for upfront and ongoing costs. Planning for these allows you to budget appropriately and avoid any unnecessary financial stress.
Costs of Home Buying: Upfront Property Buying Costs
Before you look to buy a home, you need to know exactly how much you’ll need. Sure, you might have some money to put towards the purchase, especially if you’re buying again. But, is this enough to cover all of the costs?
Let’s look at eleven overlooked costs of home buying now. Property costs typically include:
1. Stamp Duty - Stamp duty is charged as a percentage of the purchase price and this government tax varies from state-to-state. Established homes and land attract stamp duty. However, homes under construction don’t. Furthermore, in some states, first home buyers are stamp duty exempt or are offered reductions. The Federal Government website has more information for first home buyers.
Estimated Cost = $13,490 in N.S.W for a $400,000 home, if buying again. Whereas N.S.W first home buyers purchasing a home under $650,000 are stamp duty exempt. To calculate other state costs, use a stamp duty calculator found online.
2. Legal Costs - A conveyancer or property solicitor is needed to prepare the legal documents for the transfer of a property’s title. They also manage the allocation of rates depending on the date of property sale.
Estimated Cost = $600 to $2,300, depending on the complexity of the sale.
3. Rates - When you buy a property you’ll need to pay the vendor the balance of the rates. These include water, council fees and the emergency services levy.
Estimated Cost = Varies depending on the location of the property and the council governing the area. Your conveyancer will calculate the balance you need to pay to the vendor from date of settlement.
4. Insurance - When taking out a home loan, you’ll also need insurance. This cover protects the building from damage. You should take out insurance when the cooling-off period ends. Costs vary depending on the policy, insurer, and your rating.
Estimated Cost = $50+ per month.
5. Mortgage Title Transfer - This government fee is for the transfer of a property title from one name into another. While this fee is minimal in some states, it can be costly in others.
Estimated Cost = $125 to $1,000+ For instance, the transfer fee for a $300,000 home in N.S.W is $138.80, but the same home purchased in S.A will incur a transfer fee of $2,287.00.
6. Moving Costs - You have two options when moving – DIY or hiring a professional removalist. The first choice is inexpensive as it usually involves hiring a trailer or enlisting the help of friends and family with vans and wagons. But, if you want to hire a pro, then put some money aside.
Estimated Cost = $1,000 to $4,000
7. Mortgage Registration Fee - This is a government fee paid to register a mortgage. This fee is minimal in all states and territories across Australia. But, it’s still an expense that many overlook.
Estimated Cost = On a $300,000 property this can be between $130 to $190.
8. Contract-of-Sale Deposit - On top of the purchase price of a home, you’ll also need a deposit. The contract-of-sale specifies the amount needed. When buying a home via private treaty, this may be less than 1% of the asking price. However, if you’re buying at auction, then this may be as high as 10%.
Estimated Cost = On a $400,000 property this can be between $4,250 to $40,000.
9. Building, Pest, and Strata Report - If you’re buying an established property, then it’s important to have a building and pest inspection. This check ensures that you’re not buying property that needs major repairs. The equivalent for units and apartments is a strata report.
Estimated Cost = A pre-purchase building inspection costs range from $400 – $800 for a standard four-bedroom home. Strata reports typically cost $300 – $400.
10. Buyer’s Agent - Working for a home buyer, a buyer’s agent negotiates a better property purchase price on your behalf. They can also find your ideal property quicker.
Estimated Cost = Typically 1 to 2.5% of a property’s purchase price.
11. Strata Fees - If you’re buying an apartment, then you’ll need to include ongoing strata management fees. These cover the costs of property and ground maintenance.
Estimated Cost = Varies between $300 to $1,500 per quarter depending on the age and type of amenities at the complex.
Costs of Home Buying: Home Loan Costs
On top of the costs of home buying, you’ll also need to consider the home loan costs. These include:
1. Loan Establishment Fee - A loan establishment fee is an upfront fee, also known as an application fee. This cost covers loan administration, bank legal fees and settlement attendance.
Estimated Cost = $350 to $1,000.
2. Property Valuation - Your lender hires a valuer to estimate the value of the property that you’re buying. These valuations are typically around 30% under current market value as a lender wants to know that they can cover their costs should you default on home loan repayments. Subsequently, this value determines how much you can borrow.
Estimated Cost = $100 to $600.
3. Lender’s Mortgage Insurance - Covering the lender against loan default, lender’s mortgage insurance is costly. But, it only comes into play when a homebuyer borrows more than 80% of a home’s value. For more information, refer to our blog on Lenders Mortgage Insurance.
Estimated Cost = 1 to 3% of the loan amount. For example, if you’re buying a $300,000 property and you have a 5% deposit, then lenders mortgage insurance will cost $7,600. But, if you have a 10% deposit, then lenders mortgage insurance drops to $4,077.
Are you planning on purchasing a property? Contact Home Loan Depot today here, call us in 1300 967 120 or email firstname.lastname@example.org. We can help you understand the costs and where you could save. With access to 100’s of products, we’ll help you understand the ins and outs while finding you a competitive mortgage.