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The Hidden Costs of Buying your First Home

Buying a house isn’t just about paying what’s on the property’s price tag. There are some extra costs all buyers should be aware of. 

So, do you have enough cash to buy that property?

The harsh truth is that buying a home isn’t as easy as saving your deposit and waiting to hear whether your offer has been accepted. In fact, that’s the easy part. The more challenging part is making sure you have enough cash to pay for all the costs that crop up. It’s wise to know that the deposit you’ve saved is just part of the cost of buying.

In fact, if you add costs such as stamp duty and lenders mortgage insurance (LMI), you may have already spent a fair chunk of your cash. To ensure you’re prepared when the bills arrive, we have put together a list of the fees and costs you need to prepare yourself for before signing on the dotted line.

A property buying scenario to consider

So what costs are involved in buying a home? Let’s assume the following:

  • Property is worth $500,000
  • Owner-occupied (you will live in it for the first year at least)
  • Mortgage rate of 5%
  • Deposit: 10% ($50,000)

Based on this, here are some estimated costs. Costs vary depending on the provider and the state you’re buying the property in.

Legal fees: Approx. $1,500–$3,000, depending on the complexity of the structure.

Stamp duty: Based on the example above, the estimated stamp duty is approx $17,990.
This varies from state to state, if you are a first home buyer in Queensland you may be eligible for a first home concession – for more information visit Office of State Revenue. You can get an idea of how much stamp duty is by using online calculators – Click here to calculate your stamp duty.

Pest and building inspection: $300–$400
You need to get this done, especially if you’re buying a second-hand property. Even newer properties sometimes have defects that only a trained specialist can spot.

Loan application or establishment fee: $600
This is a one-off cost charged by the bank when you apply for a loan. Sometimes banks waive this fee if you’re taking a packaged loan, but not always.

Lenders mortgage insurance: $7,920
Lenders mortgage insurance is the premium you pay to insure the lender for lending you more than 80% of the value of the property. If you want to avoid paying this, you have to save a bigger deposit. The final amount will depend on the insurer, but this is a good indication of how much you should budget for.

Document preparation fee/legal charges: $200–$300
Your lender may charge a fee to prepare your home loan documents before the contract is approved.

Bank valuation fee: $300–$400
The bank may charge you for arranging an independent valuer to assess the value of the property you’re planning to buy. Some banks waive this, but some include it in the cost.

Title insurance: $360
This is insurance to protect you from any claims against the title of your property.

Registration of title: $75
This is the cost of registering the title with your state government.

Council and water rates: $500–$700
When you buy a property, you’re required to pay the vendor the remaining yearly or quarterly rates, such as water and land. These will begin from the date of settlement and will be individual to the property and area.

Legal searches and enquiries: $285
A number of searches are required to ensure there are no encumbrances on the property.

Estimated cost: $11,540–$14,050
Plus deposit: $50,000
Total estimated cost of buying: $61,540–$64,050

As you can see, there are more costs involved than meets the eye. Make sure you factor these into your budget, even before searching for that dream home.

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