Hidden Costs of Buying a Home in Australia

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    What are the hidden costs of buying a home in Australia?

    A new home is one of the most expensive purchases that most Australians will ever make. What’s the best way to reduce the costs involved in buying a house? To start, you have to become informed on the different types of expenses and how each one is applied. This article will help give you a general image of the cost for each expense.

    Government fees for buying a house

    Many of the extra house purchase costs come from government requirements. Unfortunately, these are some of the largest home ownership costs.

    Stamp duty

    This is a tax imposed on all property transactions. The exact percentage varies by state, but this will usually be one of the largest costs of buying a house. For instance, a $500,000 home purchase would come with a stamp duty of around $15,000 to $25,000.

    Note that there are some exceptions available for this. First-time homebuyers in NSW have the option to pay an annual land tax instead of the stamp duty upfront.

    Property transfer fee

    This is a state fee for transferring the home title from the seller to the buyer. It’s essential that this is done right, since you want to be sure that you legally own your home. This also varies quite a bit by state, but you could expect it to cost anywhere from $1,000 to $4,000.

    Mortgage registration fee

    This is a different state fee for setting up a mortgage on your particular property title. This is especially important if you are giving up a prior mortgage and taking on a new one. These fees are comparatively inexpensive at around $100-200.

    Title search fees

    These are fees to verify that there are no restrictions preventing the title transfer, e.g a separate mortgage or a restrictive covenant. Searches are done through the state or territory land registry. A title search fee will only cost around $10 or $20.

    Procedural costs associated with buying a house

    Buying a home is rarely a single-day endeavour. The process has many steps that require the expertise of professionals, and this can get pricey, although costs vary by state.

    • Pest and building inspections

      Before buying a home, you should have a qualified inspector check for pest issues and possible structural flaws. This can be done before you make an offer, or you can make your offer conditional on a favorable inspection result. An inspection can cost $400 to $700 depending on the size and design of the house.

    • Solicitors or conveyancers

      Real estate is full of complicated legal procedures, which is why many Australians hire a solicitor or conveyancer to ensure everything is in order. Major costs here can include searches, settlements, and disbursements. Based on how complicated the transaction is, these fees can cost anywhere from $500 to $2,000.

    Financing costs involved with buying a house

    Like with any type of loan, there are always extra charges stemming from the financing process. The nature of a home loan results in additional costs of buying a house beyond just paying the initial deposit.

    • Lenders Mortgage Insurance. If your deposit is less than 20% of the home value, you will most likely need LMI. This protects the lenders in case you become unable to pay off the mortgage. Lenders Mortgage Insurance ranges widely based on the size of your deposit and the home’s overall price. For a $500,000 home, it can cost anywhere from $2,000 to $15,000.

    • Loan application and approval fees. Lenders will often have application and approval fees that go towards the loan setup costs. You may also have to pay for loan guarantor documents if you have a cosigner. These fees vary by bank but usually range from $100 to $500.

    • Lender’s property valuation fees. Lenders will typically get an independent valuation of the property. The goal is to make sure you’re not borrowing far more than the home is actually worth. Each bank does this process a little differently, but it typically costs from $300 to $700.

    • Administrative loan fees. Loans require some work to maintain and administer, so the lender may add a recurring service fee during the life of the loan, or additional legal fees. Those loan fees average between $100 and $300.

    Other costs of buying a house

    Once you get past all of these upfront costs of buying a home, there may still be other expenses remaining. These are more flexible and will depend on the jurisdiction where the home is located as well as your own financial circumstances.

    Home and contents insurance

    It’s important to get insurance immediately as soon as you become legally responsible for the home. You don’t want there to be any ambiguity during the transition that results in your possessions not being properly protected. Insurance costs vary by company and will depend on the value of the property being insured, but are typically around $1,000 to $2,000 per year.

    Moving costs

    Moving to a new property can get expensive quickly, even without professional movers. Remember that before physically moving in, you’ll want to set up utilities like electricity, water, gas, and internet. The main factors that affect moving costs are the distance and the volume of possessions, so the price can be as low as $300 or as high as $10,000.

    Strata fees

    When buying a unit within an apartment complex or row of townhouses, there will be strata fees to cover the shared areas in and around the property. These also include building insurance and strata management costs. Strata expenses are based on the type of the house, but cost between $2,000 and $4,000 annually.

    Council fees

    During the home purchase, you may have to pay out the remainder of any yearly or quarterly fees on water and land. These are calculated based on the official date of the purchase and differ by area, but most range from $300 to $700.

    Costs and fees for buying a house conclusion

    As you can tell, several different expenses go into the overall cost of buying a home. Some costs vary drastically based on the home price, namely the stamp duty, the title transfer fee, and the Lenders Mortgage Insurance. Additional costs will depend on specifics about your house, and these include the insurance, the strata & council fees, and any moving costs.

    However, most of the costs from the financing and purchase process are reasonably consistent. For those expenses (such as inspections, legal fees, and lender fees), you can expect to pay a total of roughly $2,000 to $4,000. While precise costs will vary due to a wide range of circumstances, we hope that these estimates have given you a clearer picture of the hidden costs of buying a home.