How much does it cost to buy a home?

Buying a house or an apartment comes with significant upfront and ongoing costs.

Guides
Home Ownership
by
Erin Howell

Buying a house or an apartment comes with significant upfront and ongoing costs. Even for a seasoned buyer, it can be easy to miscalculate how much you'll need to set aside to complete the purchase. While your deposit and stamp duty are likely to be your highest costs, if you have a gnawing feeling, other costs will add up–you're right. 

While there is no one-size-fits-all cost breakdown, this guide will help you avoid sticker shock when you buy your home, invest in property or roll off your journey with OwnHome.

What should I expect when buying a home?

The price and location of your home will dictate the total of many fees. We'll take you through this in detail, but before we do—here are some principles to get across first.

Few sellers, brokers or real estate agents are incentivised to clearly communicate the true price of home ownership while you're considering owning. 

Be on the lookout for vaguely referenced or hidden fees. If there is an asterisk next to a number, read the asterisk.

Many costs are variable and fluctuate depending on the value of the property.

States and Territories across Australia, including Queensland, New South Wales and Victoria, have different fees, government charges, stamp duty and transfer fees. 

Your local government area will also dictate charges such as water rates and council rates.

In some states, first-home buyers will be eligible for first-home owner grants and incentives that minimise or remove variable costs, such as stamp duty. These are through separate state government schemes. 

Here is a breakdown of some of the costs you should consider for a $500,000 house purchase in QLD, with some estimates below:

First Home Buyer Non First Home Buyer
Purchase Price $500,000 $500,000
Stamp Duty $0 $8750
Building and pest $750 $750
Conveyancer $1800 $1800
Mortgage registration fee (home loan cost) $187 $187
Transfer fee $1120 $1120
Loan Application Fee $600 $600
LMI (if 10% deposit) $14,000 (can be added on the loan amount) $14,000 (can be added on the loan amount)
Council and water rates $500 $500
Moving costs $2000 $2000

What are the costs, and why do I need to pay them?

Here are some of the costs involved that you may not expect and how much to budget for them:

Purchase Price:

The purchase or sale price is the amount you have agreed to pay for a property. This price will be included in the contract of sale after you negotiate with the real estate agent and vendor.

Deposit:

You'll typically need 20% of the purchase price to access a mortgage. Having a larger deposit will mean you owe less to the bank and your loan repayments will be lower.

There are increasing options for low and no-deposit financing, such as rent-to-own or Lenders Mortgage Insurance. You can also read more about the costs of a deposit on our blog.

Stamp Duty‍:

Stamp duty is one of the highest costs of buying a home after the deposit. Stamp duty is also known as transfer of land duty, a tax payable in Australia on any property purchase. Each state and territory has rules for calculating stamp duty, some being more expensive and complex than others. Some states have stamp duty waivers for First Home Buyers. You can read about these government incentives for 2022 in our blog.

At the time of writing, the cost of stamp duty on a $700,000 home is $27,000 in NSW, $25,000 in QLD and $37,000 in Victoria.

Your bank or state may have a stamp duty calculator available for you, which can help with cost estimation.

Financing Costs:

Most lenders or mortgage brokers charge a loan approval fee to cover the costs of preparing security documents, application, and loan establishment costs. You'll find these fees in the product disclosure statement of the loan you are taking out. Loan applications can cost around $500-$1000 but do include things like your application fees, valuation fees,

Lenders Mortgage Insurance:

Lenders Mortgage Insurance is required if you have less than a 20% deposit. Lenders Mortgage Insurance protects the lender if you default on your loan. LMI is designed to help them recoup some of their losses if they have to sell your property to repay the loan.

Remember, LMI doesn't protect you — it only protects the lender. So, if you're having difficulties making your mortgage repayments, LMI won't help you stay in your home.

LMI costs vary depending on the property value, deposit amount, and LVR. 

If you're taking out a $40,000 loan on a $500,000 home (90% of the property value), you need to pay LMI.

Genworth's LMI calculator estimates that you might pay about $14,000 in LMI for a $500,000 property with a 5% ($50,000) deposit.

Conveyancing fees and legal fees:

Buying a home is made easier if you have a great conveyancer. The role of conveyancing will depend on the purchase complexity and the chosen provider. It is crucial that you find a good conveyancer and one that is well-trusted to ensure the process of purchasing your home goes smoothly.

A conveyancer typically costs $1000-$2000 when purchasing a home. 

There are now digital providers of the conveyancing process alongside more traditional conveyancing services.

Other costs come up within the conveyancing process that aren't fees paid to the conveyancer but ones owed to the seller. This is called the statement of adjustments. For example, these can include:

Government Charges:

Registration Fees on the property

This is the fee lodged and registered by your conveyancer or solicitor to record the change of ownership. This occurs whether a home is being purchased or you are refinancing. The cost of this varies in different states and territories.

Registration fees are typically less than $200 for each NSW and QLD.

Registration Fees on the mortgage

Registering your mortgage documents with your state or territories Land Registry involves a fee, and the cost of this varies between states and territories.

In NSW and QLD, mortgage registration fees are typically less than $200 each.

Title Search Fees

This is another search completed at the time of purchase to check ownership and any encumbrances (e.g. mortgages or loans) held against the property. The cost of this varies in different states and territories.

Title searches are typically less than $200 in NSW and QLD.

These typically add up to a few thousand dollars extra at the time of settlement.

Building and pest inspection reports:

The role of the building and pest inspectors is to thoroughly look around the house, including the roof and underground cavities, to understand if there is any structural or cosmetic damage to the home that can cause you issues down the line. These inspectors will also check for pests or future risks of pests - like termites.

At OwnHome, we always purchase these reports as we've found it a crucial step in avoiding a home with hidden defects. 

To access a report, there is typically a fee of $500, sometimes up to $750, depending on providers. Real estate agents will often organise to pre-purchase building inspection report so that it is quickly accessible to buyers. This fee is often split into $50 upfront and then $450 if you successfully purchase the home. 

You can also commission and pay for your own Building report which is an additional upfront cost—it can't be included in the loan.

If you are buying a home with a strata title, such as a unit or townhouse, this building and pest report will instead be a strata report which will outline similar defects and issues affecting common areas, among others. This will outline the building insurance on the complex and any other levies.

Other costs to consider:

  • Moving costs
  • Home insurance and Contents insurance
  • Body corporate fees
  • Changing interest rates increasing repayments
  • Other ongoing costs involved with owning a home, like maintenance and strata fees (if applicable)

In summary 

Borrowers and home buyers should be aware of the costs of buying a new property or existing home in Australia. Your financial situation post-purchase could shift dramatically if you aren't mindful of mandatory fees.

Don't forget to factor in required renovations, your new monthly repayments for your home loan, insurance premiums, removalists and other one-off costs as you cosider the total cost of homeownership.

Whether purchasing for the first time or buying an investment, the costs will vary for each purchase, so do your research and get prepared.

Disclaimer, please note: This article is intended to be general in nature and is not personal product or financial advice. It does not consider your objectives, financial situation, lending criteria or needs. You should always engage appropriate professional advisers to assist you in making significant financial decisions.

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