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Buying your first home? Prepare to pay $15,000 before moving in

Buying your first home? Prepare to pay $15,000 before moving in

RateCity investigates the real cost of buying a home.

July 30, 2010

There is sometimes more than meets the eye when it comes to the cost involved when buying a home and taking on a mortgage. Aside from saving for the deposit (which is generally 5 to 10 percent of the purchase price), you will need to outlay additional money for costs before you even buy the house, during the home loan process and then once you have purchased the property, including:

  • Stamp duty: this property tax will depend on which state the property is in, if you are a first home buyer or not, the value of property, your loan amount and whether you will live in the dwelling or rent it out. For instance, if you are a NSW first home buyer purchasing a home valued at $300,000 with a loan size of $270,000, stamp duty will cost you nothing however you will still be up for registration and transfer fees of approximately $295 and if you are not a first home buyer it will cost you approximately $9285. Whereas in Victoria using the same details it could cost you over $12,300 regardless of whether you are a first home buyer or not. For a $300,000 property and a $270,000 loan size, the current national average cost of stamp duty for a first home buyer is $4647 and non first home buyers is $9736.
  • Conveyance fees: depending on the conveyancer or solicitor the cost usually ranges from $600 to $2500 (average $1550). Ask them to disclose the cost upfront so you know what you’ll be up for.
  • Building and pest inspections: building inspections range from $250 to over $2000, depending on the size of the property. Pest inspections can cost between $200 and $400.
  • Mortgage establishment fees: this will depend on the lender and the amount you borrow. The average cost is $666 which includes application fees, legal fees, valuation fees and administration charges.
  • Lenders Mortgage Insurance (LMI): if you borrow more than 80 percent of the purchase price you will need to pay LMI which is usually an upfront fee. For example, for a $300,000 mortgage borrowing 90 percent ($270,000) LMI would cost about $3800.
  • Removalist fees: moving will cost you between $200 to around $1500 depending on how far you have to travel, whether you do it yourself or hire removalists and how many trips are required.
  • Home and contents insurance: depends on a number of factors including the price of your home, location, value of your properties contents and the insurance company. The cost can range anywhere from $700 to thousands. It’s recommended to sign up for insurance straight after the cooling off period and before settlement because if the house burns down for instance it’s your responsibility.
  • Council Rates: calculated based on the value of your home multiplied by the rate in the dollar (which is determined by the council according to their revenue and total capital improved value of properties in the area). For instance if your property is valued at $300,000 and the council rate in the dollar is 0.42 cents, your rates will be $1260.

The total cost estimated for a first home buyer before the outlay of buying a property is about $15,000 and for non first home buyers it’s about $20,000! Before you fall off your chair, there are ways of reducing the cost.

  • First Home Owner Grants (FHOG): depending on which state your property is in, you may be eligible for a FHOG. For instance in NSW you could receive $7000 to use towards purchasing your home and fees involved. Visit www.firsthome.gov.au for more information.
  • First Home Plus Scheme: some states offer an exemption from stamp duty which could save you a significant amount of money. For example in NSW you may receive an exemption of stamp duty of up to $17,990.
  • DIY: drastically reduce costs by investigating ways of doing things yourself. For example, purchasing your own conveyancing kit for around $200 could save you hundreds. However, there can be some risks involved so make sure you do your research beforehand.
  • Become your own removalist: hire a truck and do the moving yourself. Truck rental varies but usually around a couple of hundred dollars per day.
  • Compare home loans online to find a mortgage with a low interest rate and low fees which will make the costs involved with buying a home well worth it.

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