Costs of buying a house: The truths
In addition to saving up a deposit, there are other accessory hidden costs of buying a house you must budget for.
These costs include various fees and charges such as conveyancing fee, inspection fee, lender’s fee, stamp duty, insurance, etc. and can set you back by almost 5 to 10 per cent of your property’s price.
Of all the costs mentioned above, stamp duty happens to be the most oppressive – costing you thousands of dollars, depending upon the size of your property.
What is stamp duty?
Stamp duty is a tax levied by the state when you buy a property. It covers the costs of transferring the title and ownership of a property.
The amount of stamp duty payable differs in different states, and also depends upon the size and type of the property purchased.
For example, if you purchase an owner-occupied property worth $700,000 in NSW, you will find that you need to pay $27.2k as the total set-up cost including stamp duty, mortgage registration, and transfer fee. However, if you are a first home buyer, this amount reduces to a more affordable $10.7k. In Victoria, for a similarly priced property, owner-occupiers would need to shell out $38.9k for stamp duty while first home owners pay $26.5k.
You can calculate the stamp duty payable on your purchase using our handy online stamp duty calculator.
Stamp duty can add thousands to your real estate budget, and it helps to check if you are eligible for an exemption in your state. Currently, in NSW, first home buyers no longer need to pay stamp duty on both new and existing homes worth up to $650,000. For properties valued between $650,000 and $800,000, reduced stamp duty rates are applicable for first home buyers.
In addition, the State offers a First Home Owner Grant (FHOG) of $10,000 to first home buyers purchasing a new home worth up to $600,000. For owner builders, to be eligible, the total value of the constructed home must not exceed $750,000.
In Victoria, stamp duty is not payable by first home buyers purchasing a home valued less than $600,000. Concessional rates apply on properties valued between $600,001 and $750,000. First home buyers can also avail the $10,000 FHOG on purchasing a house valued up to $750,000. The amount doubles if you are looking to buy your home in Regional Victoria.
These exemptions could be responsible for heightened first home buyer activity in NSW and Victoria, suggests data. QBE Australian Housing Outlook Update states that “First home buyers have surged into the market in Sydney and Melbourne, taking advantage of last year’s stamp duty concessions.”
The report points out that “While still low, strong growth in first home buyer activity has occurred in New South Wales, and remains elevated in Victoria, likely driven by the stamp duty exemption for first home buyers introduced in these states in July 2017.”
Budgeting for stamp duty and other costs of buying a house.
If you are planning to buy a home in the near future, in addition to a 20 per cent deposit, you should keep at least 5 per cent of the purchase price handy to take care of the other costs of buying a house. These include:
- Stamp Duty – Stamp Duty refers to the tax levied by the State government on your real estate transaction and the amount you pay depends upon the size, type, and location of your property. Use our handy Stamp Duty Calculator to get an estimate of the duty payable in your State. Note that you may be eligible for a stamp duty concession in your State and it is worth checking your State’s website for latest information.
- Inspection costs – Before you buy a home, it is crucial to have it inspected by a professional to reveal any major defects that could cost you dearly in the future. A pre-purchase inspection could cost you up to $1,000 but consider it a necessary evil for your home purchase. (Learn more about pre-settlement inspections.)
- Conveyancing Fee – To ensure proper documentation, you must hire a lawyer to conduct all title searches and legally transfer the property you are buying in your name. A conveyancer usually charges a flat fee that could be upward of $1,000, but this can vary across states.
- Insurance – Protect your house from any exigencies with the right insurance in place. We share some insights on home and content insurance.
- Loan Fees – Most lenders charge you a fee for setting up your mortgage. However, the amount of the fee differs, and it is possible to find home loans with zero application fee on HashChing, an online mortgage marketplace where you can compare competitive home loan deals from over 60 lenders in Australia.
In addition to the above, you’d also need money to move from your old house to the new one, as well as undertake minor repairs (depending upon the condition of the home), and connect the utilities.
Planning your property purchase
When you purchase a house, it is vital to project your future cash flow to determine what size of a home loan you can service comfortably. It is, therefore, advisable to discuss your financial situation with an expert, before you take out a home loan, to avoid mortgage stress in the future.
At HashChing, we bring you Australia’s top brokers on a single platform that you can connect with instantly. Post your query online or fill up this contact form so that we can put a verified mortgage broker in your area in touch with you.
Remember, HashChing partner broker services are free of you; which means you got nothing to lose, only a whole lot of money to save.
By Vidhu Bajaj,
HashChing Content Writer