You’ve decided that it’s time to buy your first home; Congratulations! It’s such an exciting milestone in anyone’s life and should be as effortless as possible.
It’s important not to be caught out by the hidden costs that come with the purchase of your home. The costs add up quickly and can cause issues if you’re ill-prepared.
The following should give you a clear insight into what to expect and how to plan your savings correctly to avoid any unforeseen obstacles in your home buying journey.
Case Study: Overview of Buying Costs
Please note the values used throughout are examples only.
Property Costs
You and your partner have found your dream home with a value of $750,000. You both decide to save up for a 10% deposit and take out a loan to pay off the remaining amount. Your property costs look like this:
10% Deposit: $75,000
Loan Amount: $675,000
In addition, there are several costs related to the actual purchase of the property. Understanding these fees from the get-go will make the process seamless.
Upfront and Hidden Costs
Government Charges
- Transfer Fee – $250
The transfer fee is paid by the buyer to an attorney who is responsible for the transfer of the property to the new owners. Transfer fees differ in price, depending on the value of the property.
- Mortgage Registration Fee – $200
The Deeds Office will charge you this fee for the legal registration of your mortgage bond. The price is dependent on the amount of your home loan.
- Stamp Duty – $18,000
Stamp Duty refers to the tax you pay when you buy property. The amount depends on the state you live in and the property’s value.
Stamp duty typically costs Australians thousands of dollars. This is on top of the mortgage, deposit, and other fees associated with home ownership.
Lender Fees
- Lenders Mortgage Insurance – $10,000
In this example, you paid a 10% deposit meaning you must also pay Lenders Mortgage Insurance (LMI). This is insurance that the Lender takes out to cover any potential unmade payments from you.
- Loan Application Fees – $500
These are non-refundable fees payable by you to apply for your home loan or mortgage.
- Legal Fees – $400
Legal fees are paid to an attorney who works through all documentation during the home buying process.
Other Hidden Costs
- Moving Costs – $800
Unless you have a moving truck on standby, you’ll have to either rent one or hire movers. This can add up quickly depending on the distance and size of the move.
- Conveyancing Fee – $1,200
This is paid to the conveyancing attorney for the transfer of the property into your name. Note that it is separate from the Transfer Fee, which is more of a tax levied on the value of the property.
- Building Inspection – $1,000
This fee is paid to the building inspector, who performs a walk-through of the house before the transfer of ownership.
- Connection Fees – $300
This is the cost to connect your home to the electrical supply, water supply, telephone line, wireless internet, etc.
Total Cost
Adding up all the upfront and hidden costs, you arrive at a total of $32,650. This amount is added to your deposit of $75,000.
( Note: Depending on which state you live in, there are various schemes that may entitle a first home owner to discounts or exemptions)
Plan for Everything!
When saving up for the purchase of your home, make sure to keep all these additional hidden costs in mind. It’s always a good idea to have a financial cushion in your savings plan to cover any unexpected costs associated with the purchase of your new home.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
