Imagine that you have found the perfect home that fits into your budget, you’ve got the pre-approval, and you have saved exactly the total amount needed for the deposit. But even before signing the contract, you find out there are many hidden fees that go along with the new house, and you have no extra money to pay them.
If you are buying your first home in Australia, it is essential to be aware of all the other costs involved in this process. They might seem secondary, but if you don’t take it into account and prepare yourself financially for that, you might end up paying thousands of unexpected extra dollars.
Let’s talk about the extra costs involved in buying a home so you can plan ahead and get prepared to avoid surprises.
Hidden costs of buying a home in Australia
Here at Capta Financial, we always recommend hiring a professional building and pest inspection before deciding to buy the house to avoid future surprises.
In a pest inspection, you will have a professional checking all accessible and available areas of that property to make sure there is no visual sign of pests or termites that may affect the structure of the house or part of it.
While in the construction inspection, the professionals will check if the property was built according to the building plans and respect all requirements, standards, and regulations.
Both inspections are very important in the process of buying a home, but they might not be cheap depending on the size of the house you are buying and the city you live in, so get prepared for that.
When you buy a home in Australia, we also recommend hiring a conveyancer to help you with the legal process. This professional specialises in property transfers, which means they can make the legal process much smoother and save you a lot of time and stress.
A conveyancer will help you review the sale contract, conduct title searches and strata reports on your behalf, prepare the documents needed for the real estate transaction and arrange settlement details.
Conveyancing fees will vary depending on your needs, but just to give you an overview, the process might cost anywhere between $1,000 and $2,000.
Stamp duty (if applicable)
Stamp Duty is a tax charged by the government to transfer the ownership of a property to someone else.
Some states, such as NSW, VIC and QLD, offer first home buyers Stamp Duty concessions that allow buyers to access up to a full tax concession, depending on the property’s price. Please talk to us, and we can help you check if you would qualify for that.
If this is your case, great! Stamp Duty might not represent a very high hidden cost for you then. However, if you are not eligible for the concession or can get only a partial discount, we recommend including that in your budget.
Just to give you an idea: for an owner-occupied property worth $600,000 – if we do not consider any other Government Grant – the Stamp Duty would be something around:
Buyer’s agent fees
You might want to get help from a buyer’s agent to find the right property, which is totally recommended, but you have to get prepared to pay their fees.
The buyer’s agent fee will vary depending on the agent, but they usually charge an engagement fee in advance and a percentage of the property when it is sold. This percentage also depends on the property price, so we recommend that you check all terms and conditions before closing the deal.
Ok, you’ve bought the house, all pre-settlement and legal costs have been covered, so it’s time to move in and relax, right?
Hum, not yet! There are other hidden costs of buying a home!
Don’t forget the moving costs: you may decide to hire a professional cleaning service to remove post-construction dust from floors and walls, for example. Or, you will need a removal service to help you with the hard work.
Taking that into account and planning your budget ahead is crucial.
Each council collects rates from properties in the area to fund infrastructure and services. Fees are paid annually, and the amount varies from council to council, state to state and property to property.
We recommend you to check your council’s website to understand how rates are calculated and how much are the fees.
If you are buying an apartment or a home in a large building complex, you might include the Strata fees on your spreadsheet.
The amount to be paid by owners is decided by each Committee and varies depending on the complex’s size, facilities offered, and total expenses.
This is one of the hidden costs of buying a home most people ignore. It is important to remember that when paying a deposit lower than 20%, chances are your lender will require you to pay the LMI (lenders mortgage insurance) to minimize the risk of lending money to someone with little savings.
This fee varies according to the property’s price and how much deposit you are putting down. Check out this other post to figure out how much deposit you need to buy a house in Australia, be it a brand new home for your family or an investment property.
Contact us if you need help calculating your ideal deposit amount or anything else you need to know to buy your first home in Australia, and we will support you every step of the way.
At Capta, we take the time to get to know you and understand your needs to come up with the best mortgage solution for you and your family. Our team is based in Sydney, but we assist clients all around Australia.