9 home-buying costs you need to know about.
The true cost of buying a home often goes well beyond the purchase price, so it’s vital to know how much you will actually be up for when the SOLD sticker goes on.
To get informed - and to make sure you’re being as cost-efficient as possible - take a look at these nine home-buying costs you may not have thought of. See which could apply to you and discover tips to plan for (or even reduce) them.
1. stamp duty
Stamp duty is compulsory (sorry). It’s levied by all state/territory governments so it’s as inevitable as any other tax. But there are times it can be reduced.
Stamp duty is based on the price paid for a property (when you buy it). Buying vacant land, for example, and building later can mean paying less duty at the time of purchase than buying an established home.
Whether you’re buying land-plus-build or an established home, the more you can negotiate on price, the more you’ll save on stamp duty.
In some circumstances you may be eligible for a stamp duty concession, as some states offer savings for first home buyers and/or new home builders. Contact the Office of State Revenue in your area for details of concessions.
2. conveyancing
Conveyancing is the legal process of property buying and covers everything from reviewing the contract of sale to transferring your new home into your name.
It’s a job that can be done by a solicitor, although you may be able to reduce the cost by using a professional conveyancer instead. Fees can vary widely so it’s best to shop around.
Line up a conveyancer or solicitor before you start home hunting. That way you can act quickly when you find the right property.
3. Building & pest inspections
You’re about to make a major investment, so seeing what’s going on under the covers of your potential new home is financial common sense. While a pest and/or building inspection isn’t essential, it may reveal structural faults, dodgy building work or nests of tiny pink mice the vendor may not even know about.
A revealing report may be useful in price negotiations; if you expose future costs or problematic areas, the vendor may be willing to drop the asking price. Whether you get a report or not, make sure you can afford any potential repairs once the place is yours.
And for some top buyer’s agent advice on building and pest inspections, checkout this Happy Buyers Club podcast on Spotify and Apple podcasts.
4. Strata Report
If you’re buying an apartment, villa or townhouse, a strata report will let you know if any major building work is on the agenda – an expense the owners will have to cover. While the report itself costs a few hundred dollars, the peace of mind is priceless.
Strata reports can be provided by independent firms, or you could trim the cost by asking your conveyancer to provide one.
5. Loan and account-keeping fees
Just like the loans themselves, home-loan application fees are highly variable. They can range from nothing at all through to several hundred dollars and more, so it pays to compare lender fees carefully.
Watch out for ongoing account-keeping fees too. They quickly stack up. Use the published ‘comparison rate’ for the loan to discover its true cost, which takes into account those extra fees and costs.
6. Lenders mortgage insurance (LMI)
LMI applies if you borrow 80% or more of your home’s market value. An important point to remember is that iIt protects the lender, NOT you. LMI’s purpose is to help cover the bank’s losses if you renege on the agreement, which makes it a cost worth minimizing.
The easiest way to do this is by saving the largest deposit possible. If you can save a 20% deposit, you may not have to pay LMI at all.
Alternatively, you may be able to bundle LMI into the total cost of the loan rather than paying it upfront. Of course, this means paying (compounding) interest on the premium over the loan term, which may bump up the real-terms cost significantly over time.
7. Home building insurance
The very moment you pay a deposit, you have a financial interest in a property. That means you’re potentially liable for injuries and accidents that happen there, even if you haven’t moved in yet.
It also means any damage to the property is up to you to cover, so you need to take out home building insurance immediately after you’ve committed to the purchase.
Save on premiums by arranging cover online or ask about multi-policy discounts on home building insurance with your current insurer.
8. Getting utilities set up
Unfortunately, utilities usually don’t come with you to your new house. You’ll probably have to pay to reconnect them and maybe even pay a disconnection fee at your old place.
Connection fees for power and/or gas, internet, pay TV etc. aren’t huge in the big scheme of things, but they can all add up quickly.
Make sure you allow for time, too. Book appointments in advance so you don’t get caught in the dark. This is a good time to shop around for energy providers – it could save you a bundle in power bills
9. Transporting all your stuff!
Moving costs can range from a case of beer and a barbecue for a few mates with a ute through to several thousand dollars for a full-service removalist, so make sure you work out what’s affordable for you.
It’s also worth setting a budget for supplies to get you through moving day. Shop around for moving gear. Truck-hire companies often have “free” days over the weekend, and second-hand boxes can save you a small fortune.
You always knew buying a house was going to be expensive. With HoLo’s tips, you can plan ahead and avoid unwelcome - and costly - surprises.
HoLo can help you decide whether refinancing is the right move for you. We can help you weigh up the costs versus the benefits and explain whether a different loan could better suit your financial situation and goals. Book a free consultation using the form below or contact us.