The unexpected costs to consider when buying a house

There’s more to buying a house than meets the eye. It can help to tally up all the costs of home-buying before you start.

First home buyers can sometimes get a shock when they add up all the costs and discover that buying a house can be so expensive. And we’re not just talking about the price of the property, either. We’re talking about all the other costs of home buying, like stamp duty, conveyancing fees, and more.

Generally, you’ll need to pay for these yourself – often from the money you’ve saved up for a deposit. If you don’t factor in these costs, your deposit may end up being smaller than you think.

So what exactly are the costs? Here are the most common ones you may encounter. 

Stamp duty

Stamp duty – also known as transfer of land duty – is a tax you may have to pay when you buy property. Each state and territory in Australia has its own rules for calculating stamp duty – and some are more complex than others. 

For Australian residents, stamp duty could be up to 7% of the purchase price. The exact amount depends on a number of factors, including the location of the property and whether you're eligible for any concessions or exemptions.  

Stamp duty could cost you hundreds of dollars – or it could cost tens of thousands. There are too many variables to pin a figure on it here. As a First Home Buyer, you may be eligible for stamp duty concessions – but rules vary depending on the state or territory. 

Learn more about stamp duty rules where you live:

• Australian Capital Territory
• New South Wales
• Northern Territory
• Queensland
• South Australia
• Tasmania
• Victoria
• Western Australia

Conveyancing or legal fees

When you buy a house, you may want to engage a conveyancer or solicitor to look after the preparation and completion of all the documents – like the mortgage and transfer of ownership and settlement. Things can get complex – and these specialists can help settlement happen smoothly.

Learn more about conveyancing

Home and contents insurance

It could be a good idea to make sure that your new home is insured from the moment of settlement happens (or ideally before this). What if an electrical fire destroys the house on the day you’re meant to move in, leaving you with nothing but a home loan debt? 

Insurance is meant to cover you in the event of loss or damage to your home. It could be well worth the cost – if for no other reason than peace of mind. In fact, some lenders may require you to have home insurance before settlement happens. 

Insurance costs can vary depending on the location, type of property, type of policy cover, and more. You could expect to pay anything from hundreds of dollars to over $1,000 for an annual policy.

Building inspection

It’s one thing to go to a home open and notice a few cracks in the wall. It’s another thing entirely to get a professional to crawl around under the house and identify the causes of those cracks.

A building inspection could give you peace of mind that the property of your dreams is structurally sound. A pest inspection could also be valuable.

Prices can vary from business to business. You  may be able to get a building and pest inspection done for under $1,000, but don’t expect too much in change.

Learn more about building and pest inspections

Loan application fee

Some lenders ask you to pay an upfront fee when you apply for a home loan. However, you may be able to get this fee waived.

Moving costs

Don’t forget to factor in the cost of moving into your new home! If you need to enlist the help of removalists, this could add hundreds of dollars to your costs – or perhaps even thousands in some cases.

Lenders mortgage insurance

Generally, unless you have saved up a deposit of at least 20% of the lender-assessed value of the property, you may need to pay for Lenders Mortgage Insurance (LMI).

The amount of LMI you may have to pay can depend on your LVR and the amount of money you borrow. Different lenders and insurers have different rates for calculating LMI. When you are talking to lenders about home loans, you could ask them for an estimate. 

As a very rough guide, LMI could cost over $10,000 on a home loan of $500,000 for which you have saved a $50,000 deposit.

Learn more about Lenders Mortgage Insurance

To sum up

• There are a number of fees and costs you’ll need to factor in when planning to buy a home.
• Common costs associated with buying a house include:
  • stamp duty (land transfer duty)
  • conveyancing
  • building and pest inspections
  • home and contents insurance
  • loan application fees
  • moving costs.