Q: I had been thinking about buying my first property and have a deposit saved up, but I hadn’t factored in stamp duty. Now I’m worried I’ve missed other big costs, so what are the costs of buying a first home?
A: In addition to your home buying deposit, your budget should allow for a number of other upfront and ongoing costs of owning a home.
Some of these costs, like stamp duty and Lenders Mortgage Insurance (LMI), are fixed by your state/ territory government or lender. Others, like legal fees, will vary according to the service provider you choose. Shopping around to get a few different quotes before choosing who to use may help to trim some of the expense.
Excluding the deposit, here are the main costs of buying a property.
- Stamp duty: Based on a percentage of the purchase price, stamp duty is a tax that varies from state to state so the amount you pay will depend on where you buy the property. It will also vary according to the purchase price of the property. Stamp duty calculators can help you work out what you’ll be up for.
- LMI: If you borrow more than 80% of the purchase price you will probably need to pay LMI. There are ways to save on LMI, or having someone guarantee your mortgage is another way to potentially save, so make sure you get some advice and think about all the possibilities at your disposal.
- Legal / conveyancing fees: This can add up to a few thousand dollars and will include things like the legal transfer of ownership of the property, contract of sale negotiations and changes, and settlement.
- Mortgage or loan application fees: Some lenders charge a mortgage establishment fee so make sure you know what charges, fees and costs you’ll be up for.
- Pest and building inspection reports or a Strata search: Part of your due diligence, it’s important to know exactly what you’re buying. These reports can range from a few hundred to thousands of dollars, depending on the size of your property and the company you use.
- Utility connections: Once the property is yours you will need to pay to set up utilities like water, gas and electricity.
- Insurance: While things like Mortgage Protection and Contents Insurance are optional, many lenders will require home insurance at a minimum to be arranged before settlement.
To get an accurate understanding of these costs, it’s a good idea to get expert advice early on because then you’ll know what to expect, and can budget accordingly.
At least you are asking the right questions now because it’s important to work out all the potential costs to make sure it’s affordable.
Our First Home Buyer’s Guide contains more useful information on the costs of home ownership, including on the ongoing costs once you own your home.
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