When buying a home, there are more costs 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. So, you’re not surprised by any financial nasties later on.
Before you look to buy a home, you need to know exactly how much you’ll need. Sure, you might be eligible for a first home buyer grant. But, this won’t be enough to cover all costs. Realistically, you’ll need extra money.
Property costs typically include:
- Stamp duty – Charged as a percentage of the purchase price, this is a government tax which 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.
Cost = $13,490 in N.S.W for a $400,000 home.
- Legal costs – A conveyancer or property solicitor prepares 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.
Cost = $1,300 to $2,500.
- 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.
Cost = Balance paid by the vendor from the date of settlement.
- Insurance – When you take out a home loan, you’ll also need insurance. This cover protects the building from damage. You should take out insurance from the end of the cooling-off period. Costs vary depending on the policy, insurer and your rating.
Cost = $70+ per month.
- Mortgage title transfer – A government fee for the transfer of a property title. While this fee is minimal in some states, it can be costly in others.
Cost = $125 to $1,000+
- 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%.
Cost = On a $400,000 property this can be between $4,250 to $40,000.
- 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.
Cost = $350 to $700.
- Buyer’s Agent – Working for a home buyer, a buyer’s agent negotiates a better price on your behalf. They can also find your ideal property quicker.
Cost = 1 to 2.5% of a property’s purchase price.
- Moving costs – You have two options when moving – DIY or professional removalist. The first is relatively inexpensive. But, if you want to hire a pro, then put some money aside.
Cost = $1,000 to $4,000
On top of property costs, you’ll also need to consider home loan costs. These include:
- Loan establishment fee – An upfront fee, also known as an application fee. This cost covers loan administration, bank legal fees and settlement attendance.
Cost = $600 to $1,000.
- Property valuation – Your lender hires a valuer to estimate property value. Subsequently, this determines how much you can borrow.
Cost = $200 to $350.
- Lender’s mortgage insurance – Covering the lender against loan default, this insurance is costly. But, it only comes into play when a homebuyer borrows more than 80% of a home’s value.
Cost = 1 to 3% of the loan amount.