10 hidden costs of buying a home

Couple learns about hidden costs of buying a home

 Estimated read time: 4 Minutes

When it comes to buying a house, saving for a deposit and meeting monthly mortgage repayments are generally well-known costs. But it's important not to overlook the additional outgoings that can come with becoming a property owner.

We understand that being fully informed is key. That's why we've prepared this comprehensive guide to help you uncover the hidden costs involved so you can plan your finances more effectively and hopefully avoid any unwelcome surprises down the track.

 

Self-employed home loan and income

1. Conveyancing and legal fees

When it comes to legal matters, having professionals on your side could be a good idea. Conveyancing is part of the process of ensuring a smooth and secure transfer of ownership. These fees typically average out around $1800^, depending on the amount of work required by the legal team handling the sale.
stamp duty

2. Stamp duty

Stamp duty can be one of the largest upfront costs associated with buying a house. The amount you'll pay varies based on factors like the property's value, location, and whether you're a first home buyer. As an example, for a property valued at $500,000, stamp duty could cost in the region of $25,000, depending on the state or territory and if the purchaser is a first home buyer or not^. Try out stamp duty calculator to work out how much you may need to pay.

There are some situations when buyers will not be required to pay stamp duty. As of 1 July 2023, the First Home Buyers Assistance Scheme (FHBAS) means that properties purchased in NSW worth up to $800,000 will be exempt from stamp duty, with further concessions applying to properties worth up to $1m.

stamp duty

3. Pest and building inspections

It can pay to be proactive in protecting your investment. Arranging pest and building inspections through a qualified inspector could help spot any potential issues. The combined cost for these inspections typically come in at circa $600, depending on the property's size and location^.
Mortgage registration and transfer fees

4. Mortgage registration and transfer fees

Registering your mortgage and transferring the property title involves fees paid to the relevant government authorities. Based on a purchase price of $500,000, mortgage registration fees generally range from $119 to $200, while transfer fees can be around $300 to $4,500 depending on the state^.
Home loan fees

5. Home loan fees

When applying for a home loan, some lenders may charge an application or establishment fee to cover administrative costs. These fees can vary from $0 to $1,000 or more, depending on the lender and the specific loan product^. Have a look at the fees involved with a Pepper Money Home Loan. 
Home loan fees

6. Lenders' Mortgage Insurance (LMI)

If your deposit is less than 20% of the property's value, the lender may require you to pay Lenders' Mortgage Insurance (LMI) or similar risk fees. The cost of LMI depends on factors such as the loan amount and deposit size. For instance, a $500,000 loan on a property with a 10% deposit could incur LMI costs of around $12,000^. 
Home loan fees

7. Council and water rates

Building and property owners pay council and water rates to the state government, and these vary depending on where you live - think of these fees as your contribution to the upkeep of your neighbourhood. On average, council and water rates can range quite substantially from $500 per year in Queensland, up to more than $4000 in WA. These amounts vary depending on the property location and value^.
Insurance

8. Insurance

Organising the right insurance is important when looking to protect your property. As of February 2021, building and contents insurance costs typically range from $1,300 to $2,000 per year for a property valued at $500,000^. If you’d like to know more, then talk to your insurance provider to work out the right amount of cover.
Insurance

9. Strata fees

If you own a unit in an apartment block, it’s likely that you’ll need to pay strata fees, which go towards general management of the building and any common areas shared by tenants.

Strata fees can add up quickly, and vary depending on where you live and the type of building you live in. As a guide, you can expect to pay between 0.3 per cent to 1.2 per cent * of a property's value in strata fees - those with more amenities on-site tend to be in the upper end of this range.

Insurance

10. Moving expenses

Lastly, don't forget to consider the cost of hiring removalists for your move. Local moves can cost approximately $300 to $3,500, while long-distance or interstate moves can cost up to $6,500 or even more^.

Tip: If you’re looking to keep costs down you may decide to do it yourself – many people opt to make a few smaller trips in their own car, then hire a removalist, truck or GoGet van for the larger items.

 

We’re here to help

Being aware of the hidden costs when buying a house could help with effective budgeting and financial planning. Understanding these fees, costs, and charges could help you to make informed decisions and potentially avoid any unexpected financial burdens.

At Pepper Money, we're dedicated to supporting you throughout your homeownership journey. For more information on our range of home loan options get in touch with our lending specialists on 137 377. Alternatively, get started by finding out how much you might be able to borrow with us using our online calculator.

Barry Saoud - Pepper Money General Manager, Mortgages and Commercial Lending

Contributor | Barry Saoud, General Manager, Mortgages and Commercial Lending

Barry joined Pepper Money in July 2021 as General Manager, Mortgages and Commercial Lending. He is responsible for the strategic direction and operating performance across product, credit, and settlements for mortgages, commercial loans, personal loans, and direct sales. Read more.

Sources:

^ RealEstate.com.au - Hidden Costs of Buying a Home

* LJ Hooker: The Ultimate Guide to Strata Fees

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