10 hidden costs of buying a home

The price tag on an Australian property is hefty enough on its own, but homebuyers are up for a range of additional costs that might not seem obvious at first glance. These hidden costs can really add up and failing to budget for them can eat into your savings – or even your deposit.

Valuation fees

Your lender may require you to foot the bill for an independent property evaluation. This is a cost that you can easily research before applying for a home loan, but it will usually cost between $300 and $500.

Stamp duty

This is one of the biggest costs for homebuyers. Stamp duty might be a “hidden” fee but if you fail to budget for it, you could be hit with unplanned costs of 10 or 20 thousand dollars or more. Use a stamp duty calculator and read up on stamp duty concessions for first home buyers.

Legal and conveyancer’s fees

Getting hit with fees for a solicitor to check the legality of your contract can sting, but you need to have a professional look over the paperwork. Factor in around $1,000 for these fees, but make sure you shop around.

Mortgage registration

Every state and territory charges a fee for registering your mortgage. You can check the government website for your state or territory to confirm the exact charge, although many stamp duty calculators factor this cost in.

Upfront home loan fees

A lot of home loans come with an upfront fee, such an establishment or application fee, although it is possible to find a good home loan with low fees. This fee should be factored into the loan’s comparison rate (not the interest rate) but you should also find it in the fine print of the loan contract. These fees typically run from $200 to $600.

Lender’s mortgage insurance

Another hidden cost within the mortgage itself is lender’s mortgage insurance (LMI). You’ll only have to pay LMI if your deposit is less than 20% of the value of the loan. Genworth’s LMI estimator allows you to calculate this cost quickly, but if you want to avoid it completely, make sure your deposit is at least 20% of the property’s cost (in home loan jargon this is called a maximum loan-to-value ratio of 80%).

Building and pest inspection reports

This is a cost that many people never think about, and while it’s technically optional, buying a house without getting a pest inspection is the homebuying equivalent of diving into murky water without checking the depth.

You cannot possibly sign up for hundreds of thousands of dollars worth of debt without first checking to see if the property meets building codes and is free from termites and structural problems.

Insurance

This is a cost that isn’t tied to the loan or the house itself but it’s a big one. You need to insure your new home and its contents in case of damage. If you’re buying an investment property, you’ll need to look at building and landlord insurance.

Do your homework and compare policies in detail. A home and contents insurance policy will cost you well in excess of $1,000 per year in premiums.

Strata costs

If you’re buying an apartment, you’ll also be up for strata fees. These fees vary widely and can add up to more than $1,000 per quarter, which is a very significant cost.

Moving costs

Moving is the final step of the homebuying process and it’s one that many purchasers neglect to budget for. Research from ING found that the average Australian move costs $1,600.



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