When setting a budget for your new home it is important to give yourself an allowance over and above the headline purchase price. Between Government levies, lending costs and other hidden expenses, it can soon grow to be in the tens of thousands. Costs will vary depending on your circumstances though we hope this cheat sheet helps you avoid any unwanted surprises. All costs are based on our experience in the Geelong market.
Building and pest inspection – we generally recommended you have your prospective home inspected for building faults and pests, particularly for older homes. For a cost of around $300-$500, your building inspector will provide a report pointing out areas of the home that may need maintenance. It can provide great peace of mind and may help you avoid purchasing a lemon. Most inspectors will charge a fee for the building inspection and a separate fee for a pest inspection.
Conveyancing and legal fees – a conveyancer will look over the purchase contract for your prospective home to assess whether there are any red flags or information you need to be aware of. For example, is there an easement over the property or is there a special provision which says the spa or dishwasher will be removed? The cost of a conveyancer can be as little as $600 though more commonly they cost upwards of $1,000. Some conveyancers will charge a flat fee to review as many contracts as needed (within reason) before you find your home dream, whereas others charge a fee per contract review. Using a solicitor who does conveyancing will generally be more expensive, though it can come with greater expertise.
Loan application fee – each lender will have their own unique fees schedule which may include a loan application fee, valuation fee and settlement fees. You will need to check with your broker or lender what these fees are. In most instances it can be upwards of $400 and can be added to your loan.
Stamp duty (and transfer fee) – This is often the single biggest cost in purchasing a home and is usually in the tens of thousands. Stamp duty is levied by the State Government and is payable by the land purchaser, however, there are exemptions and concessions available for first home buyers, senior Australians and other types of purchasers. To calculate the stamp duty payable in Victoria, head to the state revenue office website at https://www.sro.vic.gov.au/calculators/land-transfer-calculator
Mortgage registration fee – if you’re like many Australians you’ll need to get a mortgage to purchase your home. It will cost you $119.70 to register a mortgage in Victoria. If you have a property to sell, it’ll also cost you $119.70 to discharge a mortgage on the property.
Lenders mortgage insurance (LMI) – If you don’t have enough in savings to put down a 20% deposit for your home, your lender may require you to get LMI. LMI protects the lender if you are unable to make your repayments. The cost of LMI depends on the size of your loan relative to the value of the home. The more debt you use, the greater the LMI. Genworth are a large provider of LMI and have a useful calculator – https://www.genworth.com.au/lenders/lmi-tools/lmi-premium-estimator/
Council and Utility rates – as a homeowner you will have to pay council rates and an additional levy for your utilities. Rates are based on your house value and can vary significantly between councils. At a minimum you may be up for $1,000 pa, however, we suggest planning for a higher cost. When settling on the purchase of a new home, you will have to pay the previous owner for what they have already paid on your behalf. This is captured in the transfer settlement.
Initial set up costs – the process of moving creates additional, often forgotten about, costs including removalists, storage, new furniture and immediate repairs. Have a think about what the house may need to be liveable. For new home purchasers, closely review your build contract because they often exclude a driveway, letterbox, clothesline and landscaping.
Home and contents insurance – it makes sense to protect what will likely be your biggest asset… ever! The cost to insure a $500,000 home and its contents can be upwards of $1,000 pa. This is best done when you sign the contract, not when you move in after settlement.
Personal insurance – if it’s your first home, odds are you don’t have personal insurance cover. If you now have a large mortgage, it’s important to ensure you can continue to make repayments, regardless of what happens to you. Cover such as income protection, life and total and permanent disability cover should be considered and come at a cost.
Cash buffer – Life needs to be lived and at times it throws up curve balls. It’s important to have a cash buffer to cover life’s unexpected events.
Where to from here?
If you’d like to speak with one of our qualified mortgage experts, then feel free to give us a call on 1300 242 700.