Home loans

What are the extra costs of buying a home?

Buying a house is not just about paying what the asking price is.  We decided to write a few words on this topic and provide an example as we feel that it can often be overlooked.  

When taking out a home loan and buying a home there are fees and expenses associated.   Let’s take a look at the common extra costs that need to be considered and estimated during the process.  Note this list may not be exhaustive but it gives a good guide and estimate.

For example, if you are wanting to buy a home in Queensland that is priced at $500,000 you can reasonably expect to the pay the following:

  • Property value: $500,000
  • Conveyancing and legal fees: $1800
  • Stamp duty: $0 for first-home buyers, $8750 for others
  • Building and pest inspection (combined): $600 
  • Mortgage registration fee: $195
  • Transfer fee: $1379
  • Loan application fee: $500 – $600
  • Mortgage insurance: $8000 (depending on the deposit you have available)
  • Council and utility rates: roughly $500 (per quarter)

Total costs = $512,707 – $521,824

So as you can see that $500,000 quickly turns into nearly $522,000.  

Let’s take a look at these a little closer. 

Conveyancing and legal fees: $900-$1800 - Conveyancing and legal fees are the costs associated with engaging with a conveyancer or solicitor when buying a home.  While it is possible to complete the legal aspects of buying a property yourself, it’s generally recommended that you engage a conveyancer or solicitor to prepare the documents for you and provide advice.  They are the ones that are responsible for firming up many of the estimates that are outlined below.  

Stamp Duty - stamp duty is the tax you pay on certain transactions and documents, in this case it refers to the tax you will have to pay when you purchase a property.  Stamp duty can cost tens of thousands of dollars. The exact amount depends on the value of the property and the state in which you buy it.  The more expensive the home, the more you’ll pay. For example, a $1 million purchase can attract stamp duty as high as $55,000.  Fortunately, most states offer stamp duty exemptions and concessions to first-home buyers. On a $500,000 house, first home buyers won’t pay any stamp duty in Victoria, New South Wales, Northern Territory or Queensland.  Meanwhile, buyers who have previously purchased a home can expect to pay between $8750 (Queensland) and $23,929 (Northern Territory) on a house valued at that price.

Building and Pest inspections - Pest and building inspection fees are payable when you engage with professionals to have them inspect the house to check for any problems.  Estimated costs: Around $600.  Having the property checked for pest and other damage can be one of the hidden costs of buying a house. These checks are particularly important for older homes.  We encourage all our buyers to engage a reputable building and pest group. 

Mortgage registration and transfer fees - Mortgage registration and transfers fees are the costs associated with formally registering a mortgage and transferring the property ownership upon buying a home.  These are government fees.  You will need to pay for the privilege of formally registering your mortgage. And, as the new owner, the cost of transferring the property into your ownership will fall to you, too.  Mortgage registration fees vary from state to state whilst transfer fees, on the other hand, are generally more expensive, ranging from a flat fee in New South Wales, to thousands of dollars in South Australia, Victoria and Queensland.

Loan Application or establishment fee - Loan application or establishments fees are the application costs associated with setting up loan.  Estimated costs: At least $500-$600.  When you take out a home loan, you don’t simply pay back what you borrow – you also have to pay to set up the loan in the first place.  The application fees are generally around $500-600, though they can be more than $1000, depending on the loan and lender.  It is worth noting, however, that some lenders will waive this fee under certain circumstances, so it’s worth asking.

Mortgage insurance - Mortgage insurance is a mandatory cash deposit that is required to enter a home loan and secure a property.  Without a deposit of 20% or more, most lenders will require you to pay lenders mortgage insurance.  This fee is calculated on a sliding scale: the smaller your deposit, the more insurance you’ll pay. On a $500,000 home with a 10% deposit ($50,000), you’ll be asked to pay insurance of around $8000.  The insurance amount may seem like a lot, but it allows buyers to purchase a home with as little as 5% of the purchase price as a deposit, helping them to get a foot on the property ladder sooner rather than later.

Council and utility rates - Council and utility rates are the fees you’ll need to pay the vendor for council or water rates after purchasing the property.  The vendor will have paid any rates owing to the council – generally until the end of the quarter – and they’ll simply add your portion of that amount to the purchase price.  

So as you can see it is not as simple as it seems and all those little extra costs can add up and make it that little bit more challenging when proving to the bank that you have the funds to complete the transaction.  Happy to work through your numbers and ensure you are on the right track.  

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