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.)

Government fees

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

Stamp duty rates vary from states 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.

For more information about the stamp duty applicable in your state, see your state government’s website, or speak to your home loan provider.

Mortgage protection insurance

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. Mortgage protection insurance is obligatory for some loans, especially if you are borrowing more than 80% of the valuation of the security property.

Mortgage protection insurance can protect you in unforseen circumstances where you might not be able to pay your loan. Types of cover include:

• Life cover in the event of your death,
• Disablement cover if you are unable to work due to injury or sickness, and
• Involuntary unemployment cover, where you are covered if retrenched and unable to meet repayments.

Legal Fees

Legal fees are often around two per cent of the price of the property. However, they vary by state and by the legal professional you choose . You should be aware of the legal fees you will be required to pay before you buy a house.

Inspection fees

There are two main forms of inspection that are recommended and between them they will cost around $700:

1. Building inspection - checks for structural problems
2. Pest inspection - ensures the house is free of pests and termites

Moving costs

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.

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.