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The real cost of buying a home


Laine Gordon

Laine Gordon


You may have a vague idea of the fees and charges associated with buying a home, but many first-home buyers are caught by surprise by the hidden cost of becoming a homeowner.

From inspection costs to legal fees, bank fees and insurance, the real cost of buying a home can be as much as 5 percent of the sale price.

Make sure you’re prepared for the additional costs by doing your homework before you begin scouring the property market, and following this checklist to take the sting out of the home buying process.

Home inspections and valuations

Banks are increasingly demanding buyers conduct home inspections before they approve home loans – and that’s a cost you have to wear. ArchiCentre and the Housing Industry Association conduct home inspection reports for between $350 and $500.

Many banks also use a valuer to inspect the property before approving finances. If you want an independent valuation to ensure you are not paying more than the property is worth, you will have to pay for it yourself. The cost varies depending on the property.

Legal fees

The often complicated legal issues involved in buying a house makes it virtually impossible to avoid using a lawyer. A solicitor will conduct the legal transfer of ownership, and ensure everything is completed correctly. They’ll also perform title searches and ensure the seller is legally entitled to sell the property. When buying an apartment, the solicitor will check the strata corporation’s records to ensure everything is above board. Legals costs are generally around $1000.

Tax

State governments charge stamp duty on all property purchases. The cost is based on the purchase price and varies in each state (exemptions may apply).

Bank fees

There’s a common misconception that banks and fees go hand-in-hand. While most borrowers will have to fork out for home loan application fees and other establishment fees, accounts and loans with low or no ongoing fees do exist and it pays to shop around for these options, because the savings can really add up.

Insurance

Most banks require that you sign up for insurance as a condition for approving your home loan, so you’ll need to factor in this ongoing expense as part of your budget.

Moving costs

Even if you rope in your friends to help with the move, you may still have to hire a truck to move your belongings into your new home. And if you decide to freshen up the property with new paint, new carpet or new furniture, you’ll need to count these costs as well.

Rates and utility connections

As a home buyer, you will be responsible for council rates, water rates and strata fees (depending on the property type) immediately on the day of settlement. You should also factor in power charges.

To get a better idea of the costs of buying a home try using one of the many online tools available for homeowners, such as home loan calculators or the government’s MoneySmart budgeting tool.

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