Emma Norris - 7 May, 2021
Buying a home is likely the biggest and most important purchase you’ll ever make. Thankfully, it’s also one of best investments, making all of those years of diligent saving worth it. Although getting a deposit together is the hardest step, it’s not the only transaction involved in buying a home.
There are many additional costs — both big and small — that are often overlooked by first time buyers. This can leave buyers blindsided and out–of–pocket with extra costs to cover. We’ve compiled a guide listing the upfront and hidden costs involved in buying a home to ensure you’ve covered all bases.
There are various upfront expenses you’ll need to pay your lender when securing your mortgage. These are usually consolidated into a lump sum and included in your overall loan.
Apart from your deposit, stamp duty is usually the second–largest upfront cost. Stamp duty is the tax you must pay on your property purchase and like your deposit, it’s calculated based on the value of the home you’re buying.
Lenders Mortgage Insurance
LMI is a one–off payment, usually between 1–3% of your loan amount. You can waive this cost if you have a deposit of more than 20% or if you have a guarantor.
Title transfer fee
This is a fee charged by the local government to transfer ownership of the home from one person to another. It varies from state to state, but generally costs are between $100 and $140.
Mortgage registration fee
Another government fee which registers your physical property as security on your home.
Some lenders prefer you to pay for stamp duty via other means, such as your savings. However, in many cases your lender will include stamp duty (potentially your Lenders Mortgage Insurance too) in your overall loan amount.
Yes, you will need to pay your deposit — also known as a down payment — to your lender upfront to secure your mortgage. However, there are some exceptional circumstances where a no deposit home loan is available. If you already own a property, you can also use any existing equity in place of a down payment.
Unless you’re exempt under the First Home Owners Grant, you will be required to pay stamp duty – which is tax charged by the government on your property purchase. If you use your property as an investment property, you will also need to claim it as income in your annual tax return.
Most upfront fees tend to be fairly well–known among buyers. Here are the hidden fees that tend to fly under the radar:
Moving in to your home can be more costly than you think. A Guide to the Cost of Home Purchase estimates a bill between $550–$3500.
Legal and conveyancing fees
It’s wise to hire a licensed conveyancer or solicitor to ensure your transfer goes smoothly and your legal documents are airtight.
From visiting your lender to being on site for the inspections, it’s important to keep petrol, parking and toll costs in mind. These smaller travel expenses can add up quickly.
Unfortunately, the costs of being a homeowner don’t stop after the settlement date. Some ongoing costs to factor in include:
You’ve worked hard to buy your new home — now it’s time to protect it. Many mortgage providers actually require you to purchase home insurance (sometimes also contents insurance) in order to cover your home when repairing and rebuilding. The cost of this can vary by as much as $1,335 in Australia, so it pays to shop around.
Strata fees and council rates
Usually billed quarterly, council rates are your contribution to local projects, infrastructure and the maintenance of public spaces. The amount you pay will depend on where you live. If you live in an apartment or townhouse, you will also need to pay strata fees to cover the upkeep of common areas like the pool or laundry, or even the building itself.
Whether your home requires some fix–ups now or later, it’s important to factor in foreseeable renovations when choosing a home.
Utilities and household bills
Unless you rent your property out, gas, electricity, internet and water are all ongoing expenses you’ll need to cover. The amount you pay for gas and electricity depends not only on your provider but also the size and location of your property.
While selling your home is far kinder on the wallet, there are still some costs involved. These include:
If you still have a mortgage owing on the property you’re selling, you will need to pay your lender an early exit or discharge fee. This discharge process can also take between 14 to 21 days.
Ask your lender upfront how they expect to be paid. Some agents work with a flat rate, while others will ask for a percentage of the sale price. Some agents also use bonuses as an extra financial incentive to try and sell the property above the agreed–upon reserve.
Much like buying a home, it’s recommended that you use a professional conveyancer or solicitor to handle the title transfer of your home
While real estate agents will generally recommend a marketing plan, it’s up to you to foot the bill. These costs can include professional photographs of your property, copywriting for your listing, creating a floor plan, signage and more.
Better known as conveyancing, legal ownership of the home must be transferred from one person to the other. While you can choose to do this yourself, it’s best to consult a licensed conveyancer or solicitor to ensure settlement goes through without a hitch.
Hiring a solicitor or conveyancer can cost you anywhere between $500 to $2000.
There may also be some additional disbursement charges, which are charges paid by the conveyancer to a third party. These include settlement fees, certificates and searches such as land tax and heritage listing.
Technically there’s nothing stopping you from handling your own conveyancing. Some states such as Victoria and Queensland even offer DIY conveyancing kits for around $100, which guide you through the process. However, it’s important to note that conveyancing can be quite time–consuming and overwhelming. It can also be quite costly if you make an error and set back your settlement process. If you’re not well–versed with legal terms or comfortable handling complex paperwork, it’s best to hire a qualified conveyancer or solicitor.
You can generally expect it to take between 4 to 6 weeks from putting in your mortgage application until the settlement date.
Some solicitors and conveyancers do accept payment via credit card, up to a certain amount.
Yes, a conveyancer or solicitor will normally conduct a search of property title records during settlement. They can also order other appropriate searches, such council or water rates, roads, land tax searches and heritage listings.
The conveyancing process can take anywhere from 30 to 90 days depending on where in Australia you live, so be sure to check in with your local guidelines.
The cheapest way to buy a house is not always the best, as it’s more important to ensure the property is a robust long–term investment. However, there are some ways you can reduce the costs involved in buying a home. You may choose to look in a more affordable area or purchase a cheaper fixer–upper that will increase in value with renovation. It’s also a good idea to take advantage of the First Home Owner Grant if you are eligible, as this can make purchasing a home considerably more affordable.
Research shows that only 10 to 20% of home transactions are done without the assistance of an agent. While there’s no legal requirement to use a real estate agent, there’s a good reason most people choose to do so. Real estate agents are likely to have a much better understanding of the suburb and market you are buying in. Agents will also have better negotiating skills, meaning you’ll be left with a better deal.
Although first home buyers are expected to pay the upfront and administrative costs mentioned, they may be eligible for a range of concessions – depending on the state or territory and property price. Each Australian state and territory has their own version of the First Home Owners Grant, so be sure to check out our guides to your area.
Words by Emma Norris
By making sure you’re aware of both the upfront and hidden costs involved in buying a home, you can approach a lender with confidence and avoid any unpleasant surprises. Need help getting a home loan? At eChoice, our experienced brokers can assist with your application and help you find the right mortgage for you.