The real cost of buying a home, not just the deposit

When buying a home, you know you will need a deposit but there are other costs you should consider. The costs listed in this article can vary depending on many factors. It is important you do your own research into each cost to get an idea of how much you will need to pay. You should also consult with your financial expert (mortgage broker, accountant, financial adviser, conveyancer, legal adviser) to get a more precise idea of the final costs you will pay.

Stamp duty

Stamp duty is a duty payable to the state or territory on transfer of the land or other property and is one of the biggest extra costs you will need to pay when buying a house. The amount of stamp duty will differ for each state and territory, depending on a number of factors including the property price, whether the borrower is a first home buyer, or whether it is an existing property or a new home. Some states may offer stamp duty concessions for first home buyers. Find out if you are eligible for these concessions through your financial expert for personalised advice.

Mortgage registration fee

A mortgage registration fee is paid to formally register a mortagee’s security interest against your property. This fee varies between each state and territory.

Transfer fees

Transfer fees cover the cost of transferring the title to the property from the seller to you. This fee will differ by state or territory.

Loan application or establishment fee

Your lender may charge you a loan application or establishment fee. This fee covers the lender’s administration costs for setting up your loan application. The fee will vary by lender and may vary depending on the loan amount.

Valuation fee

Valuation fees may be payable if you or the lender engage a valuer to provide a valuation for the property you want to buy. This will vary by valuer and may also depend on the location of the property.

Lenders mortgage insurance (LMI)

If you do not have 20 per cent deposit plus the cost of any associated fees and duties, your lender may require you to pay for Lenders Mortgage Insurance (LMI). LMI covers your lender in case you default on your loan repayments, and they can’t recover the outstanding loan amount from the sale of the home. The lender will usually pass the cost of the LMI premium to the home buyer as an upfront fee payable at loan settlement. However, some lenders may provide a monthly payment option that allows you to pay the LMI fee cost monthly, until your loan has been paid down to below the loan-to-value ratio (LVR) determined by your lender, or until the loan is discharged. You can estimate your LMI fee with Helia’s LMI fee estimator.

Buyer’s agent fees

A buyer’s agent may be able to help you with your search, work to your budget, and negotiate the purchase on your behalf. If you use a buyer’s agent to find your home, you may need to pay them a fee. They may charge a flat fee or a percentage of the property price.

Inspection costs

You may engage building and pest inspectors before you buy your home. The cost of building and pest inspections vary depending on your location and the size of the property. You may also engage a strata inspector if you are buying an apartment.

Conveyancing or legal fees

Most home buyers will typically engage a conveyancer or solicitor to handle the legal paperwork required for settlement and transfer of their new home. These fees vary a lot depending on many factors, including complexity of the transaction, and if additional property-related searches are required before settlement.

Home and contents insurance

Your lender will likely require you to have home insurance to protect the value of your property. You may also want to consider contents insurance. The cost of your insurance will vary a lot depending on many factors. You can use a comparison website to find the best home insurance options for your circumstances.

Cleaning & repair costs

Before you move into your new home, you may have to do some repairs. It is important to get a few quotes to make sure you are paying a fair price for the repairs. You may also want to hire professional cleaners to make sure you have a fresh start in your new home.

Service connections

Before you move into your new home, you will need to connect your internet, electricity and gas. Each of these services may charge you a connection fee.

Moving costs

The cost of moving into your new home will vary depending on how far you are moving, how much furniture you are moving and if you are engaging professional packers and movers, hiring a truck to move yourself, or if you have some good friends who will help you move (in exchange for a pizza party in your new home at the end of the day, of course). Compare several removalist quotes from different companies to make sure you find the best deal for you.

Investment property management costs

If you are buying an investment property, and you choose to engage an agent to market, lease and manage your property, you will need to pay fees to them for their services.

Case Study

Dylan and Ben saved up to buy their first home. Unsure how much they could afford to borrow, they contacted a mortgage broker.

The mortgage broker explained that, after allowing for payment of stamp duty*, conveyancing fees and other upfront costs, they had an $80,000 deposit and could purchase a property up to $800,00 with help from Lenders Mortgage Insurance (LMI).

CRUNCHING THE NUMBERS

Home price: $800,000**

Saved deposit: $80,000

Loan amount: $737,712**

Incl. estimated LMI fee: $17,712***

Monthly repayments: $4,115****

LMI ONLY RAISED THEIR MONTHLY MORTGAGE REPAYMENTS BY $99*

With the help of LMI, Dylan and Ben now own their own home. They were able to stop paying rent and start building equity.

Speak to us today if you would like more information about the costs associated with buying a home.

* The amount of stamp duty payable will vary depending on the Australian state/territory where the property is located. First home buyers should also consider their eligibility for assistance from relevant federal, state or territory government schemes.

** Loan amount based on 90 per cent LVR plus the LMI fee which is capitalised into the loan. Excludes stamp duty and other costs of purchase. Assumes that no other fees and charges are payable. Lending criteria and conditions apply to approval of credit products.

*** LMI is capitalised into the loan. The actual LMI fee may vary from the estimate depending on a range of factors including, the loan purpose, borrower type, security type or updated information received at the time of the application.

**** Estimated monthly repayments based on a 30 year loan at an interest rate of 5.34% p.a. Variable rate subject to change over the loan term at the lender’s discretion.

Source: It’s my home magazine

This publication has been produced by Helia Group Limited (’Helia’). This publication may include content which is owned by third parties (’third party content owners’) and that has been provided to Helia for publication. Opinions expressed in this publication are of the writer or contributor and do not necessarily reflect the view of Helia or its affiliates. This publication covers a variety of topics including property, insurance and other financial products and services. Although some of the information involves tax, stamp duty, legal, accounting, financial or similar issues, Helia, its affiliates and the third-party content owners (as to their materials only) (‘we’) are not in the business of offering such advice and nothing in this publication constitutes a personal recommendation or advice. You must consult with your own professional advisers to examine the legal, tax, accounting or investment aspects of any information presented in this publication and how they may affect your particular situation.

The information also does not contain all of the applicable terms, conditions, limitations or exclusions of the products or services described. We expressly disclaim all responsibility and liability for any action or inaction by you in reliance or partial reliance on any material, information, opinion or advice in this publication or referred to in this publication. The information is current as at the date of publication but may change without notice. We are under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. We do not take any responsibility for any reliance on the information contained in this publication or for its reliability, accuracy or completeness. Nothing in this publication is an offer by or on behalf of Helia or its affiliates to sell, or solicit an offer to buy, any security or financial product.

COPYRIGHT NOTICE All copyright in the contents of this publication belong to Helia, its affiliates and licensors or to third party content owners. All rights are reserved. To the extent permitted by law, no part of any materials in this publication may be reproduced or transmitted in any form without the express written consent of Helia.

Share this post