One of the biggest goals in life for most people is to own their own home, a place you can call your own. However, most prospective buyers aren’t aware of the many associated costs that are involved. You may think that you only need to save a deposit, obtain home loan approval and choose your dream home. However, to be truly prepared you need to know all of the costs that are involved.
We’ve summarised a number of such costs to help you achieve the dream of owning your own home:
1. Stamp Duty
This can be the largest purchase cost and is a charge applied by the State Government where you are buying property. The amount is determined by factors such as the State the property is in, your purchase price and whether you are either buying your first home, buying a new home or buying an investment property. In Queensland, if you qualify for the first home concession this cost is currently $0 for purchases under $500,000.
Our Stamp Duty Calculator can be used as a guide and your Solicitor can confirm such costs.
2. Registration of Title / Transfer Fee
This is the cost incurred for registering the change of ownership with the Land Titles office. Currently the cost for a $500,000 purchase in Queensland is $1,231.
3. Mortgage Registration Fee
This fee is charged by State Governments for registering the mortgage over the property. Upon sale of your property a similar fee is also charged for de-registration of the mortgage. Currently in Queensland the fee is $175 and is subject to change.
4. Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance is typically payable if you are unable to contribute at least 20% of the property purchase price as a deposit. The Mortgage Insurance premium protects the lender, not the borrower. To learn more about LMI, please read our news article ‘What is Mortgage Insurance?’
5. Legal Fees or Conveyancing Costs
For peace of mind most purchasers will engage an expert to assist with the settlement of a purchase. The cost for such services will depend on your chosen Solicitor / Conveyancer and the complexity of the work required.
6. Conveyancing Searches
Your Solicitor or Conveyancer will assist you in completing a variety of searches before purchasing your property, for example a Property Title search. The number of searches completed will impact on your overall conveyancing cost so it is important to discuss with your professional which searches you wish to have completed.
7. Loan Application / Bank Fees
Some banks will charge a one off application fee and a regular monthly fee however increasingly this is waived by opting into a package arrangement. The cost of such a package is often up to $395 per year and will typically offer no application fees, a discounted interest rate, no ongoing bank account fees and an fee free credit card.
8. Bank Valuation Fee
Some banks, particularly online lenders, may charge you a fee to have your property valued as part of the application process.
9. Document Preparation / Bank Legal Fees
Many lenders will charge an administrative fee to cover the cost of the preparation of mortgage documents and completion of the settlement process.
10. Building and Pest Inspection
Looks can be deceiving. Whether the home you are purchasing is brand new or an established dwelling, a building and pest report can alert you to any defects or damage that might exist such as items requiring immediate repair or termite damage / activity. The cost of a Building and Pest report might set you back upwards of $500 however it could save you thousands by avoiding a property in need of major repair.
Other ownership considerations:
Body Corporate Fees
When you purchase a unit, townhouse, apartment, villa or duplex, there will be regular financial contributions towards the upkeep and running of the strata property you’ve bought into. These fees go towards the shared ownership and responsibility of the ‘common property’ such as driveways, gardens, pools, stairways, laundries, lobbies and the exterior of the building as well as possibly a sinking fund for expected and unexpected long-term expenses.
Real Estate Agent Commission
If you are selling your current home to fund the purchase of a new home, it is critical to consider the sale proceeds you will receive net of agents commission as this expense in addition to the new purchase costs can take up a considerable chunk of your deposit.
This is a particularly important consideration for first home buyers who have previously been renting. Whilst you may have paid a lot of attention to your budget in light of proposed loan repayments, the additional responsibility of council rates, water rates, home insurance and especially ongoing repairs and maintenance can add a significant amount to your monthly expenses.
Emergency Fund / Buffer
Buying a property is likely to be one of your biggest expenses and requires a lot of upfront capital however it is important not to put absolutely all of your funds towards the purchase but instead retain a buffer of cash for emergencies and other items. If you exhaust all of your savings for the purchase, you will immediately be under pressure to save for your first repayment on top of likely wanting to buy some new furniture or appliances.
Perhaps one of the most important things to consider is reviewing your Personal Insurances after taking on a new mortgage to protect you and your family from the unexpected. Most people have some form of insurance within their Superannuation however it is likely that this is not enough. To find out more about the types of insurances available take a read of our Personal Insurances page.
Our Property Buying Cost Calculator can be used as a guide to consider the cost incurred when buying property.
Contact us on (07) 3491 8822 to discuss any queries you may have or to arrange a meeting in our North Lakes offices.