The Costs when Buying a Home

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.

1. The price of your home

This is important – the listed price of a property is not set in concrete, and some hard bargaining can see you save thousands of dollars. As a general rule, try knocking 10% off the listed price – maybe more if the property has been on the market for a while. Bear in mind, lenders generally want to see a deposit of at least 5%, so don’t commit to a property you cannot afford.

TIP: Try to avoid giving the impression you love the place. It’s a lot harder to haggle for a discount if the agent can see you are completely hooked on the property. Speak to us for help in finding out the estimated price with a free personalised property report.

2. Stamp duty

Stamp duty – also known as transfer of land duty – is levied by all State/Territory governments so it’s as unavoidable as a pair of socks from Nanna on your birthday.

For Australian residents, stamp duty could be up to approx. 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.

But there are ways to trim it down. For example, as duty is based on the price paid for a property, buying vacant land first and building later can mean paying less duty than if you purchase an established home. Either way, the more you can negotiate on price, the more you’ll save on stamp duty.

Learn more about stamp duty rules where you live

3. Conveyancing

Conveyancing covers everything from reviewing the contract of sale through to transferring your new home into your name. It’s a job that can be done by a solicitor, but you may be able to halve the cost by using a professional conveyancer. Budget for around $1,000 though fees vary widely so shop around.

TIP: Line up a conveyancer or solicitor before you start home hunting. That way you can act quickly (and maybe cheaply) when you find the right property.

4. Pest and building inspection

A pest and building inspection isn’t essential but it will reveal structural faults, dodgy building work or pest problems the seller may be trying to hide. Allow around $500 for a combined report.

TIP:  A poor pest and building report can be useful in price negotiations, but also be sure you can afford any repairs once the place is yours.

5. Strata Report

If you’re buying an apartment, villa or townhouse, a strata report can tell you the building’s ‘deepest darkest secrets’ or if any major works are on the agenda – an expense you as the new owner would have to cover. Allow around $300 for a report.

TIP: Strata reports can be provided by independent firms or trim the cost by asking your conveyancer to provide one

6. Lenders Mortgage Insurance (LMI)

LMI applies if you borrow more than 80% of your home’s value. LMI protects the lender, not you, and that makes it a cost worth minimising. The easiest way to do this is by saving the largest deposit possible. Saving a 20% deposit is not always possible, so LMI can also allow you as a buyer to get into the property market earlier.

TIP: You may be able to add LMI to the loan rather than paying it upfront. This also means you will have a bigger loan amount, which will increase your loan repayments.

7. Home building 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.

Home building insurance is a requirement for most lenders before settlement.

8. Utilities

Connection fees for power and/or gas can be around $80. Allow more if you’re adding internet and pay TV.

TIP: This is a good time to shop around for energy providers – it could see you save a bundle in power bills

9. Furniture removal

Moving costs can range from a case of beer and a BBQ for a few mates through to several thousand dollars for a full-service removalist.  Work out what’s affordable for you and what will be most convenient and stress free on the big day.

TIP: Take out home and contents cover before you’ve settled into your new home.

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