The costs of buying a home include the purchase price, stamp duty and conveyancing and mortgage costs include lender fees, interest and potentially LMI. Most buyers are aware of the deposit requirements when planning to purchase property with finance. Many will work towards achieving that savings target, without due consideration to how they will cover the other expenses associated with a property purchase. Budgeting and planning for the expenses can be an important preparatory stage to purchasing property.
Buyers can be overwhelmed with the many terms they come across when embarking on their property purchase journey. First-home buyers in particular may not have come across many of these before. Terms and issues that relate to the costs associated with purchasing and owning property and with taking on finance for the mortgage. Understanding what each of these costs is and how they are calculated can be a great starting point.
We provide this explainer and buyers can use our online calculators and resources to start planning for their extra, upfront expenses.
Costs of Buying a Home
The obvious cost of buying a home is the purchase price which is straightforward. In addition, buyers also have to pay Stamp Duty on the purchase. This is a tax to the relevant state or territory government and is calculated as a percentage of the purchase price or property value. The percentages vary with different states/territories. This is an upfront cost which is due to be paid in full by the deadline for that jurisdiction.
As Stamp Duty can be a major expense, we’ve made it easy for buyers to find out the cost for their purchase with our Stamp Duty Calculator. The calculator is formulated with the thresholds and percentages for each region. Simply enter the price of the property and select the state/territory from the dop down menu to obtain a figure for your planning.
Most property buyers will also incur conveyancing fees. These are fees to a solicitor or conveyancing service to process all the documents pertaining to the purchase. The fees will vary with the provider. Simple property transactions may be completed using online conveyancing service providers which may be more affordable than engaging a property lawyer.
Depending on the property, many buyers will want inspections and reports from building professionals before settling on their purchase. These reports include detailed inspections of the integrity and state of the property and may identify any issues not disclosed in the purchase documentation.
An emerging trend in the property market is for buyers to use a Buyer’s Agent. These are real estate professional who provide a service to find buyers properties to meet their specifications. The service can save buyers time in searches and inspections. If using a Buyer’s Agent, a fee will be payable for the service.
Mortgage Costs
Most property buyers will require financing and that involves costs. The monthly loan repayments are the main expense of a home loan. The repayments also include a portion to cover the interest on the loan. With variable rate home loans, the repayment amount will change when lenders change their rates in line with Reserve Bank cash rate decisions.
Home loans include lender fees and charges. These vary with lenders and with the type of home loan. Some fees are incorporated into the repayments while others such as Loan Establishment Fees, may need to be paid upfront. Your Yes broker will detail the fees associated with your loan when the quote is sourced.
Lenders Mortgage Insurance is another cost that some buyers will need to pay as an upfront cost. This applies on low deposit home loans – loans with a deposit less than the standard 20%. LMI is paid to the lender and the lender then pays their insurer. This is a one-off payment made when the loan is finalised. Buyers with 20% deposit will not need to pay LMI.
Property Ownership Expenses
Once you have purchased your property, you will need to budget for the ongoing expenses associated with property ownership. For first home buyers moving from renting to owning, these costs of home ownership would not have needed to be considered or paid as tenants.
If purchasing an apartment, strata fees and levies will apply. Strata fees vary with different properties. They are usually paid quarterly and will be detailed in the property listing advertisement so buyers know what to expect. In addition, there are also water and council rates, insurance and property repairs and maintenance.
Planning Your Costs of Buying a Home
Saving for a deposit is a great start to owning property. But buyers should also set aside funds for their upfront costs so they don’t have to use the deposit savings for these expenses. To assist buyers set the target for their costs, we have online calculators to get estimates.
For details on the costs of buying a home and mortgage costs, book a consultation with one of our Yes Home Loans brokers on 1800 000 937.
DISCLAIMER: THE INTENTION OF THIS ARTICLE IS TO PROVIDE INFORMATION OF A GENERAL NATURE ONLY. THE ARTICLE IS NOT PROVIDED WITH THE INTENTION OF BEING THE ONLY SOURCE OF INFORMATION ON WHICH PROPERTY BUYERS SHOULD MAKE THEIR DECISIONS. BUYERS WHO NEED GUIDANCE AND ADVICE ON PROPERTY LOANS BASED ON THEIR INDIVIDUAL CIRCUMSTANCES ARE ADVISED TO CONSULT WITH A SPECIALIST MORTGAGE BROKER OR FINANCIAL CONSULTANT. NO LIABILITY IS ACCEPTED FOR MISREPRESENTATION OF FOR ANY ERRORS IN DATA, POLICIES AND SPECIFIC DETAILS THAT HAVE BEEN OBTAINED FROM OTHER SOURCES.