The upfront costs of buying a home
Budgeting to buy a house involves more than just calculating how much you can afford to spend on buying the house (and the amount of the deposit you need or have). There are a number of costs associated with buying a home which should be factored into your budget. Here are some of the most common.
Stamp duty is a state and territory government tax based on the purchase price of the property. Because it’s paid to the state or territory the property is in, the amount you’ll need to pay will vary depending on where you’re located as well as on the price of the property and other factors such as whether you’re a first home buyer or an investor
Unfortunately, stamp duty is often a significant cost, so it’s vital you take it into account when working out your costs. Our upfront costs calculator can give you an indication of how much stamp duty you could have to pay as well as other costs to consider when buying.
Depending on the state or territory there may be stamp duty concessions for some properties or buyers, such as if you’re building a new home to live in or if you’re a first home buyer. You can get details of any concessions that you may be eligible for from the revenue office website for your state or territory
- Australian Capital Territory
- New South Wales
- Northern Territory
- South Australia
- Western Australia
Building and pest inspections
Although these may seem expensive, the price you’ll pay could be a fraction of the cost (not to mention headache) if you end up with pest infestations or building issues after you’ve bought. In some cases you may be able to combine both the pest and building inspection, which should help to keep costs down.
There are several legal steps involved with buying a home. These include:
- Completing a property and title search to make sure the seller is legally entitled to sell and that there are no encumbrances on the property
- Arranging a strata inspection and checking the strata body corporate records if your buying a unit that’s part of a strata scheme
- Reviewing and exchanging the contract of sale
- Arranging to pay stamp duty
- Overseeing the transfer of the title of the property from the seller to you.
Mortgage establishment fees
Depending on who your lender is and what loan you have, there may be various fees to establish your mortgage. These could include an application fee as well as valuation and settlement fees.
Title transfer fee
The title transfer fee is a state/territory government fee for transferring the property title from the seller to the buyer. The cost can vary significantly depending on what state or territory the property is in – you can find details of the charges on the website of the state/territory revenue office.
Mortgage registration fee
Another state or territory fee. As a property is the security for the mortgage, the state/territory government needs to register the home loan so that any future buyers can check for any mortgages on the property.
Lenders Mortgage Insurance (LMI)
If your deposit is less than 20%, you may need to pay Lenders Mortgage Insurance. LMI is designed to protect your lender should you default on your loan. With some lenders, however, you may be able to include the cost of Lenders Mortgage Insurance as part of your mortgage, so you won’t necessarily need to come up with the cost upfront.
Depending on your circumstances, one option that could be worth exploring is a parental guarantee. This enables parents to use the equity in their home to help their children buy a home. Find out more