We all know that home buying requires significant financial investment. However, not many realize how lengthy this process can be. Federal and State governments may be handing out incentives left, right and centre, but this doesn’t mean that you no longer need to prepare an extensive cost analysis before buying a home.

Some buyers pay as much as 11% to purchase a property. If you have a $44,000 deposit for your $400,000 home, that’s your entire deposit spent on costs.

If you’re a first-home buyer, the costs are eased by the Grant for the First HomeownerConsider other incentives offered by the government. But, it is important to remember that miscellaneous costs can really impact your finances.

Savings can be used to buy appliances, furniture and renovate your home. It’s worth creating a budget detailing your expenses before you go on the property market.

Costs to purchase a house in Australia

Here are the costs for purchasing a home in Australia

Homebuyers will usually incur two types of costs: upfront costs when securing the loan, and ongoing costs once you’ve bought the home. Calculating your mortgage finances is a great way to know both the upfront and ongoing costs. 

Costs upfront to buy a house

Lenders Mortgage Insurance

Lenders Mortgage Insurance Lenders charge mortgage insurance if the homebuyer borrows over 80%. LMI is an additional cost that the borrower must pay to protect the lender in case of default.

LMI costs can vary depending upon the insurance provider you choose, and how much deposit you have. You can use our Lenders Mortgage Insurance Calculator to get an estimate.

Conveyancing and legal costs

It is essential to retain a lawyer or conveyancer when buying a property. Although there are DIY conveyancer kits available online, there’s just no substitute for the real thing. 

A solicitor or conveyancer will prepare all the required documentation and be your go-between with the bank and the vendor you’re buying the property from. Additional fees may apply for the registration of the land and/or transfer of your mortgage.

In that they are both experts in different areas, a solicitor is different than a conveyancer. This can impact the price of their services. A solicitor can provide more options and more legal advice.

Building and pest inspections

It is strongly recommended to have a building inspection, pest inspection (for houses or separate residences), and a Strata inspection (for units or strata homes). 

These reports provide information about the structural integrity of the building and any pest problems. You will also be informed about possible repairs. A strata inspection report will provide information about the condition of the building and any planned work.

Stamp duty

Stamp duty, also called transfer duty, is a costly expense. It is often one the most criticised costs of property purchases. The cost of stamp duty varies by territory and state. First-time buyers can also get concessions.

For example, stamp duty costs on an existing home worth $800,000.00 in New South Wales would be $31,000 Not all lenders allow this cost to be capitalised into the home loan, so it’s a cost you need to be prepared to pay for upfront in addition to your deposit.

Agent for the buyer

Obviously, you don’t have to have a buyer’s agent but it’s certainly a cost to consider. A buyer’s agent works exclusively for you as the homeowner to find, negotiate and purchase a property to suit your wants and needs.

They have all of the research tools and contacts at their fingertips and will track down the right home for you, generally within a short 45–60-day window. The same task can take homebuyers six months. They can often swoop in on properties that aren’t even on the market yet and get you in ahead of the competition.

Moving costs

Professional removalists may take out the stress of the job, but it is possible to rent a truck or trailer to transport your belongings.

Charges for home loan

For a home loan, you may need to pay upfront fees. Although lenders try to make fees and charges transparent for borrowers (each lender might call them something else), you may still be surprised by some fees.

Take, for example., application feesIt can also be called establishment fees?, and Settlement fees may sometimes be referred to as the lender’s legal fees. An application fee may be required. Settlement fee, Preparation fees for documentsUnd a valuation fee.

Some borrowers may find budgeting more difficult because of this. It is important to read and understand the terms of your loan contract. A mortgage broker should be available for you to discuss all costs related to your home loan.

To find out the true cost of your loan, it is important that you discuss the comparison rates schedule with your broker.

These fees could apply to your home loan payments

  • Loan establishment fee. This upfront fee is required to fund your loan. It is sometimes called application fees and can be used to cover one valuation, bank legal fees and settlement attendance fees.

  • Security assessment fee/Valuation fee Your lender will employ an external valuer to do an assessment on the property you’re purchasing. This will provide you with information about the loan amount the lender is willing to offer you as a borrower, and as a potential homeowner.

  • Security Guarantee Fee If a guarantor is putting up security towards your home loan, you’ll be charged a fee.

  • Rate lock fee: When applying for a mortgage, fixed rate borrowers must pay a fee. Fixed rate borrowers pay a rate lock fee to secure their rate. The rate lock fee is a fee that fixed rate borrowers pay to secure their rate.

  • Prepare documents for a feeYour lender may charge you for the preparation of your documents to get a home loan. This cost could be added on before you sign the contract.

Maintenance costs

Council rates

When you buy a property you’re required to pay the vendor the remaining yearly or quarterly rates, such as water and land. These fees will be payable at settlement. They will be specific for your property.

Strata and corporate body

If you’ve purchased an apartment, unit or townhouse, you’ll need to pay body corporate or strata fees. These fees are for the maintenance of the property as well as building insurance. NotThe contents of your apartment, as well administrative fees for body corporate/strata Management.

Regular maintenance and repairs

As a homeowner, you’ll also need to budget for regular maintenance and repairs on your property. Hopefully, these expenses won’t happen too regularly but you do need to budget for them as they can quickly become very expensive.

Painting, cleaning out gutters and maintaining air conditioners are some of the ways to maintain your property.

You can repair a broken hot water heater, an air conditioner that somehow stops working in the middle summer, a leaky washing machine or screen doors.

Home and contents insurance

Lenders require that you take out building insurance as part of the loan application. It is dependent on the type of contract and where you live that you are building insurance. The timeframe for building insurance will vary. Generally speaking, you’re required to have building insurance on the property from the day both parties sign the contract of sale, or by settlement.

It’s also wise to take out contents insurance which covers all the contents within the property, including all your furniture, electronics, and so on.