It comes as a surprise to many people that a property’s price tag does not account for the entire cost of buying a house. Additional expenses come along during the planning, viewing, and application processes. These costs will vary depending on the property’s type, location, and value, but it’s essential to know what costs are involved when you buy a house.
This will help you budget accordingly and prevent you from overspending on your new home. Here, we’ve provided a guide to some of the costs involved when buying a house and what you can roughly expect to spend.
When it comes to the cost of buying a house, the deposit is usually at the forefront of peoples’ minds. For most home loans, a deposit of 20% of the purchase price is required. However, in many cases, it’s still possible to obtain a mortgage to purchase a home with a deposit as low as 10%. In these cases, you will usually need to pay the additional cost of Lenders Mortgage Insurance (LMI). It would help if you kept in mind that the lower your deposit, the higher your LMI will be.
In Victoria, the amount you pay in stamp duty (also called land transfer duty) is calculated on a sliding scale and depends on several factors. These include whether you are buying a house as your principal place of residence (PPR), if you are a foreign purchaser, whether you are purchasing a new or established home, and if this is your first time purchasing a home.
There are some circumstances in which you are eligible for duty concessions or exemptions which can significantly reduce the amount you pay in stamp duty. For example, if you buy a new or established home valued at up to $550,000, you may be eligible for the PPR duty concession. You can apply for this concession in combination with a first home buyer duty reduction, which is available regardless of whether the home you are purchase is established or new.
Head to the Victorian SRO Website to learn more about Victorian stamp duty exemptions and concessions or calculate an estimate of how much your stamp duty is.
Legal and Conveyancing
Using a conveyancer or solicitor to prepare and organise documents when you buy a house is strongly recommended. Their expertise and experience in the specifics of home-buying processes will take a lot of pressure off you. Your solicitor or conveyancer can also advise you on essential practices when buying a house. They will ensure that the transfer documents are managed correctly, and the property is rightfully transferred to your name.
Legal and conveyancing fees can be anywhere from $1000 – $3000. These fees will vary depending on several factors, including the property’s value, type of property and the amount of work involved for the conveyancer.
Though this will add to the cost of buying a house, it’s a worthwhile expense to have peace of mind that your conveyancer will handle everything correctly.
Finance & Insurance costs
Many different application and insurance fees apply when you buy a home. As mentioned before, if you’re borrowing over 80% of the purchase price, you will usually need to pay LMI.
There are also application fees to set up your home loan. Loan application fees are usually around $500-$600, depending on the bank or lender. There are some circumstances in which this fee can be waived, so we recommend asking your lender.
A mortgage registration fee should also be factored into your cost of buying a home. In Victoria, this fee is usually $112.40 and will be paid at settlement.
Building & Pest Inspections
Building and pest inspections are another cost of buying a house that you should consider. These inspections are conducted in the pre-purchase phase of buying a home to check the property for structural damage, decay, and house pests like termites. In addition, conducting building & pest inspections will help prevent unforeseen costs after moving in.
Though they aren’t mandatory in Victoria, it’s strongly recommended for your peace of mind. Costs average around $500-$700.
Unfortunately, your settlement date doesn’t see the end of the costs involved when buying. When evaluating your finances before buying a house, there are additional costs you should factor in.
The Cost of Moving
Moving house can be as cheap or expensive as you make it, but there are costs associated no matter what. For example, you may need to rent or buy boxes and packing supplies to move. There is also the cost of hiring a removalist or truck to transport your belongings.
There are also the ongoing costs of owning a home. These include your mortgage repayment, utilities like water and electricity and council rates/strata fees.
Don’t forget to account for insurance costs like home & contents insurance, as well as mortgage protection insurance.
Repairs & maintenance are other continual costs that you will incur after buying your home.
Investment Property Costs
There are additional costs involved when you are buying a house to let it as an investment property. General costs of buying a house for investment include maintenance, insurance, property management, council/water rates, land tax & body corporate (if applicable). Some of these are tax-deductible, but it’s important to consult your accountant to claim these correctly.
Buying a house with the intent to rent it out will also change the type of mortgage you can take out. Usually, your bank or lender will require a full 20% deposit for investment property purchases. Interest rates on loans for investment properties are typically higher, which is important to factor into your property cost.