The true cost of buying a home.
The true cost of buying a home goes well beyond the purchase price.
1 – The price of your home
This is important – the listed price of a property is not set in cement, and some hard bargaining can see you save thousands of dollars. As a general rule, try knocking 10 per cent off the listed price – maybe more if the property has been on the market for a while. Bear in mind, lenders generally want to see a deposit of at least five per cent, so don’t commit to a property you cannot afford.
TIP: Try to avoid giving the impression you love the place. It’s a lot harder to haggle for a discount if the agent can see you’re completely hooked on the property.
2 – Stamp duty
Stamp duty is levied by all state and territory governments, so it’s unavoidable. As duty is based on the price paid for a property, buying vacant land first and building later can mean paying less duty than if you purchase an established home. Either way, the more you can negotiate on price, the more you’ll save on stamp duty.
TIP: Contact the Office of State Revenue in your area for details of concessions. Some states offer savings for first-home buyers and/or new-home builders.
Conveyancing covers everything from reviewing the contract of sale through to transferring your new home into your name. It’s a job that can be done by a solicitor, but you may be able to halve the cost by using a professional conveyancer. Budget for around $1000 though fees vary widely so shop around.
TIP: Line up a conveyancer or solicitor before you start home hunting. That way you can act quickly (and maybe cheaply) when you find the right property.
4 – Pest and building inspection
A pest/building inspection isn’t essential but it will reveal structural faults, dodgy building work or pest problems the vendor may be trying to hide. Allow around $500 for a combined report.
TIP: A poor pest/building report can be useful in price negotiations – be sure you can afford any repairs once the place is yours.
5 – Strata report
If you’re buying an apartment, villa or townhouse, a strata report (cost: around $300) will show if any major building work is on the agenda – an expense the owners will have to cover.
TIP: Strata reports can be provided by independent firms or trim the cost by asking your conveyancer to provide one.
6 – Loan fees
Home loan application fees can range from $0 through to more than $700, so it pays to compare between lenders. Watch out for ongoing account-keeping fees too. They quickly stack up.
TIP: Use the ‘comparison’ rate to discover the true cost of a loan.
7 – Lenders mortgage insurance (LMI)
LMI applies if you borrow 80 per cent or more of your home’s value. LMI protects the lender, not you, and that makes it a cost worth minimising. The easiest way to do this is by saving the largest deposit possible.
TIP: You may be able to add LMI to the loan rather than paying it up front. This means paying interest on the premium, which bumps up the cost.
8 – Home building insurance
As soon as you pay a deposit you have a financial interest in a property. At that point you need to take out home building insurance.
TIP: Save on premiums by arranging cover online or ask about a loyalty discount if you hold multiple policies with the same insurer.
9 – Utilities
Connection fees for power and/or gas can be around $80. Allow more if you’re adding internet and pay TV.
TIP: This is a good time to shop around for energy providers – it could see you save a bundle in power bills.
10 – Furniture removal
Moving costs can range from a case of beer and a barbecue for a few mates with a ute through to a several thousand dollars for a full-service removalist. Work out what’s affordable for you.
TIP: Take out home contents cover as soon as you’ve settled into your new home.