The costs of buying a house: what hidden expenses have you forgotten?
There are a great number of expenses associated with buying a house - some up-front costs you expected, and some you probably haven’t considered. This guide explains some of these, including government fees and stamp duty, mortgage protection insurance, legal fees, inspection fees and moving costs.
Home loan costs
When you buy a house you have to pay money to a number of different people. One of the most obvious is your home loan provider – both mortgage repayments and lender fees. When choosing a home loan it’s important to look into a variety of mortgage packages and to study the fees that apply to each home loan product. Do you need a loan with lots of features (and some extra charges to boot)? Or will a basic, "no frills" product with a lower interest rate be better for your needs? (Read more about home loan features here.)
A number of government fees will apply, including land transfer registration fees and government taxes. These fees are a mixture of flat fees and variable charges that change with the price of the property. You need to read the fee structures for your particular state carefully to make sure you understand all the charges that apply.
Stamp Duty rates vary from state to state and these can add a very significant cost to the property you are buying. First home owners may be eligible for a reduced rate of stamp duty in some states.
Lender's mortgage insurance is another fee to take into account, and the price of this varies from institution to institution, depending on the value and type of loan you have selected as well as the deposit you have saved. Mortgage insurance is obligatory for some loans, especially if you have less than a 20% deposit saved. Mortgage insurance doesn't protect you for any financial loss, but it does protect the lender against a home selling for less than the lender is owed.
Legal fees will vary by state and by the legal professional you choose. You should factor into your budget such fees when buying a house and they will vary depending on the size and complexity of the purchase. In order to minimise conveyancing and legal costs there are websites available that help you quickly receive and compare conveyancing quotes. Just remember that experience and quality are also important factors in making a decision.
There are two main forms of inspection that are recommended:
- Building inspection - checks for structural problems
- Pest inspection - ensures the house is free of pests and termites
Getting a building and pest inspection completed gives you peace of mind about your new home purchase
Another important set of costs to consider are moving expenses, especially if you are moving a long distance. These can be quite significant, and vary considerably from company to company, so it’s worth doing your research and shopping around. Once again there are websites that allow you to quickly and easily receive multiple moving quotes.
The costs you might not have considered
There are also other fees, such as utility connection or transfer fees, which are paid to connect the water, electricity and gas. While occasionally these may be paid for, generally you will be expected to meet these costs.
When buying a house it’s important to construct a detailed budget that takes into account all the costs you could accrue, revise it… and revise it again, to make sure you aren’t surprised by any unexpected costs.
Grants & other monetary help available
Although all these costs above may scare you out of purchasing a house, remember there are also many grants and concessions available to a range of different purchasers, from nearly every state in Australia.
First home buyer grants are a main area where buying a home can be made easier, the Australian Capital Territory offers a $7,000 grant, New South Wales offers a $15,000 grant, the Northern Territory offers grants between $12,00 and $25,000, Queensland offers a $15,000 grant, South Australia offers grants from $5,000 to $15,000, Tasmania offers grants between $7,000 and $15,000 and WA offers a $7,000 grant.
Another grant is available to people building new houses whether they are first home buyers or not, this is available in South Australia. A similar grant is available to non-first home buyers in the Northern Territory.
Concessions and exemptions from stamp duty costs are also available in most states, for first home buyers and pensioners.
Buying a house is one of the biggest, if not the biggest financial decisions you will ever face, it is natural to be scared, but don't let this fear stop you from living in your dream home.