What are the different upfront costs involved in buying a property?
When buying a home or an investment property, you’ll typically encounter a wide range of government, lender and miscellaneous costs that need paying. So, let’s go over them briefly to make sure everyone’s on the same page.
There’s a slew of government fees and charges that must be considered when calculating the costs of purchasing a property in your state or territory. Our calculator can help you identify these charges and fees, which will typically vary based on where you live in Australia.
Stamp duty, also known as a transfer fee, is a government-imposed tax that applies to the transfer of a property’s title between two owners, which is paid by the person buying the property. The amount of stamp duty you’ll pay is largely determined by the value of the property and the state or territory you live in; however, it may also be affected by:
- State government grants, concessions or exemptions (e.g. the First Home Owner Grant or the New Home Grant)
- The type of purchaser you are (e.g. stamp duty will typically be more for foreign purchasers)
- The type of property you purchase (e.g. new build, old home, vacant land)
- The purpose for which you’re purchasing the property in question (e.g. residential or investment).
You can use our stamp duty calculator as a starting point to work out an estimate of how much stamp duty you could pay for your home loan. We also have state- and territory-specific stamp duty calculators for:
Mortgage registration fee
A mortgage registration fee is the fee you pay to register a mortgage to assist in purchasing a property. Mortgage registration fees will differ depending on your state or territory, and the fee is collected by the Land Titles Office in each one.
Although mortgage registration fees vary across the country, they’ll typically fall somewhere between $100-200; for example, in New South Wales, the fee for registering a mortgage is $154.20 as of October 2022.¹
Most buyers don’t have the money to purchase a house outright, so they’ll generally take out a home loan from a lender to finance their property purchase. Some of the fees that generally apply when dealing with a lender include:
- Loan application fee
- Valuation fee
- Document preparation fees
- Settlement fees.
However, be sure to enquire about the specific fees with your lender to get a thorough idea what they charge to their home loan customers.
Lenders mortgage insurance (LMI)
LMI is a cost that lenders generally charge to borrowers whose loan amounts represent more than 80% of their home’s total value; meaning, their loan-to-value ratio (LVR) is higher than 80%. LMI can usually be avoided by either having a saved deposit worth at least 20% of the value of the property you want to buy or being approved for a scheme such as the First Home Guarantee, in which case the government guarantees part of your loan to preclude you having to pay LMI. As LMI can add thousands of dollars to your home loan repayments over time, you may want to avoid paying it if possible.
When buying a home, you’ll almost definitely need to engage the services of a solicitor and/or conveyancer, which in turn means being on the hook for conveyancing fees and your solicitor’s time.
A solicitor will be able to guide you through and help you with any and all legal aspects of the home-buying process and your mortgage, whereas conveyancers specialise in conveyancing – the area of law concerning the transfer of properties from one party to another, like sales contracts and mortgage documents.
While all solicitors are technically qualified to handle matters of conveyance, it may not be their area of specialisation, so a dedicated conveyancer may be a better choice.
However, you may want to do your own research and weigh up the pros and cons of each option, as well as their respective costs, before making a choice one way or the other.
Other buying costs
There’s a variety of miscellaneous and auxiliary buying costs and fees that will typically apply when buying a house, which could include:
- Building and pest inspections. You’ll typically want to commission both a building and pest inspection for any property you’re seriously considering buying. This will go a long way towards uncovering any nasty surprises like structural damage or pest infestation that could cost you lots down the track if unaddressed.
- Moving expenses. Your moving fees will depend on the distance you’re moving, how much you have in the way of furniture and belongings and the mover’s rates. You may want to do your own research ahead of time to get a better idea of what moving may cost you.
- Connecting utilities. When you move house, you’ll have the option of either carrying across your existing utility plans or arranging new connections with new providers. Either way, you’ll likely pay a handful of small connection fees for luxuries such as lights that turn on and showers that aren’t freezing cold.
- Home and contents insurance. In most cases, your lender will require you to at least have home insurance in place before letting you take ownership of a property. You may also want to take out contents insurance for peace of mind regarding your belongings. The premiums you pay will be influenced by the value of your home and belongings and the area you live in, among other factors.
Our property buying cost calculator lets you factor in all these considerations and walk away with a final estimation of the additional charges and fees you’ll pay on top of your prospective property’s purchase price. This in turn can be invaluable in helping you draw up your budget when it comes time for you to purchase a new property.
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