A townhouse with red-bricked walls.
It’s no secret that buying a home is expensive. If you’re searching for a home loan or getting ready to buy, then you’re probably aware that it’s not just the home loan you have to worry about. Unfortunately, buying a home involves multiple, different property purchasing costs you’ll have to pay before you throw your housewarming party.
In this article, we’ll cover the different upfront home loan costs, why you need to pay them and when you’ll need to pay them in order to access your home. We’ll also give some rough estimates of how much these fees can cost. However, it’s important to check with your lender to get an exact quote on how much you owe:
- Stamp duty (or transfer duty)
- Conveyancing and legal fees
- Building and pest inspections
- Home loan application and maintenance fees
- Lender’s Mortgage Insurance (LMI)
- Other costs
Having an accurate estimate of the figures you’ll need to save to buy your home will give you peace of mind. This is because you can save for one of the biggest purchases you’ll ever make. Our upfront cost calculator can help you estimate how much you’ll need to save for your dream home. As so, you can be confident from application to settlement.
Stamp duty
One of the biggest property purchasing costs, stamp duty, or transfer duty, is a tax you pay to your state government when purchasing any property. The state governments calculate stamp duty based on the property purchase price. As so, the more expensive your property is, the more stamp duty you’ll pay.
Many states offer concessions and other discounts off stamp duty when you buy property. If you’re a first home buyer, you may be eligible for a partial or full exemption on stamp duty when buying your home. In NSW, for example, first home buyers purchasing a property valued up to $650 000 can receive a full exception on stamp duty or a partial exemption if their property is valued between $650 000 and $800 000. If you’re ineligible for these stamp duty concessions, there may be other first home buyers schemes that could save you thousands.
As stamp duty is a large cost. Hence, getting an idea of how much you’ll need to pay can give you some peace of mind as you review your savings. Check out our stamp duty calculator to find out how much stamp duty your property requires.
Conveyancing and legal fees
Conveyancing and legal fees refer to the fees you pay when working with a conveyancer or solicitor, a legal professional that helps you secure your home loan. This legal professional will help you transfer the property into your name and verify the other aspects of your home loan application and settlement to protect your purchase legally.
The fees charged by conveyancers and solicitors vary, but you can expect to pay between approximately $800 to $1 800. The more complex your home loan settlement process is, the higher the charges are. However, it’s best to get in touch with your conveyancer or solicitor or even a mortgage broker to get an accurate estimate of what you’ll need to pay in legal fees.
It may be tempting to want to do the legal work on buying your property on your own. However, having a qualified professional prepare and review your documents and provide you with informed and personalised advice will ensure you don’t miss out on a good deal or run into legal issues, which will end up costing you more in the long run.
And although conveyancers and solicitors both assist people in purchasing their dream homes, their roles and responsibilities do vary slightly. Check out our conveyancer vs solicitor comparison to determine which professional would work best for you.
Building and pest inspections
Building and pest inspections involve paying a professional to inspect your property for pests or building damages before you move in. You can usually expect to pay around $600 for a combined building and pest inspection. Although some may think they can save $600 by avoiding this inspection, getting a professional to inspect your home is very important. This is particularly true if you’re buying an older home. With a thorough professional inspection, you can be sure there’ll be no nasty surprises when you move in. If not, you might need to pay more to repair than an inspection. For advice on whether a building or pest inspection is required for your property, contact your conveyancer or solicitor.
Home loan application and maintenance fees
Most lenders will charge home buying fees related to registering and maintaining your mortgage over the life of the loan. These fees can be broken down as follows:
- Mortgage registration fees: up to $190
- Application/settlement/valuation fees: up to $900
- Transfer fees: anywhere from $141.60 to thousands of dollars*
Mortgage registration and application fees are fees you pay when you register your mortgage with a lender. A valuation fee involves getting a formal valuation of your property. Lenders will usually request this as part of your application. Alternatively, some lenders may include this cost in your application fee, or you’ll need to pay it separately.
Nevertheless, some lenders will waive some of these fees due to special offers and circumstances, particularly in the case of application fees. Get in touch with your lender to see if you’re eligible for these discounts, or speak to a broker, who can handle all the communications with your lender for you and even negotiate a better deal.
*Transfer fees vary greatly from state to state and some states no longer charge transfer fees. Do your research to ensure you have enough saved for transfer fees in your state or territory.
Lender’s Mortgage Insurance (LMI)
If you’re planning on borrowing more than 80% of your property’s value or you’re providing a deposit that’s smaller than 20% of your property’s value, you may need to pay Lender’s Mortgage Insurance, or LMI. This is a one-off cost you pay directly to your lender to provide them, not the borrower, with extra security in the event you have to default on your loan.
LMI can cost thousands of dollars, so finding a way to avoid this cost is worth the effort. Find out more about LMI and the ways you can avoid it, such as by getting a guarantor or applying for a home loan for professionals if you’re a doctor, engineer, lawyer, IT professional, for example.
You can also use our LMI calculator to determine how much LMI would be owing on your loan. If you’re not sure about your eligibility, you can also get in touch with a broker, who can outline all your options.
Other costs
Although these costs usually kick during and after the process of moving in, it’s important to factor them in when checking out your home buying costs:
- Council and utility rates: rates charged for water and council services. These fees vary depending on where your property is.
- Strata fees: fees covering shared property ownership. These can vary.
- Property repairs: any repairs the property requires as you move in.
- Property renovations: any renovations you need or want.
- Hiring a removalist: all the costs involved with moving your belongings.
What are your next steps?
We hope this guide to property purchasing costs has given you a better idea of how much you’ll need to save when buying a property. Although we can provide some rough estimates as to how much you’ll need to save per cost, it’s important to contact your bank or a broker to get the exact figures for your personal situation. That way, there’ll be no nasty surprises come settlement.
If you’re finding that keeping track of your property purchasing costs is becoming overwhelming, you’re not alone. Get in touch with one of our experienced brokers, who can provide you with all the answers at no cost.
Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.
