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?
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.
Inspection fees
There are two main forms of inspection that are recommended and between them they will cost around $700:
Building inspection - checks for structural problems
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.
Lenders Mortgage Insurance
Lenders mortgage insurance (LMI), is a way for lenders to protect themselves if the borrower can no longer pay the mortgage and defaults on the loan. LMI is often a requirement stipulated by lenders when a borrower buys a property with less than a 20 percent deposit. The lower the deposit, the more risk the lender is exposed to and the higher the probability of default
Some other fees you may not have expected are costs 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.
When I bought my first house i allowed approximately 5% (inclusive of the First Home Owners Grant) of the purchase price to cover everything.