When you’re in the market for a new home, you know you’re going to be dealing with hundreds of thousands of dollars. Most of us will spend years saving for a reasonable deposit before finally holding the keys to our dream home in our hand, but there are more hidden costs in buying a home than you may realise. It pays to be prepared for these costs and to budget for them.
The costs hit your hip pocket before you even put down a deposit for your new home. Spending your Saturdays driving from one property inspection to another may not seem like it’s costing you money, but you could end up paying hundreds of dollars in petrol before you find the perfect home.
Pest and building inspections
It’s a risky strategy to buy a home without conducting a pest and building inspection. An inspection can cost between $500 and $1000, and you may end up paying for this more than once if you miss out at auction. If you are buying an apartment, it is important to conduct a strata search to get true picture of the state of the building and the strata fund.
This is a big one to budget for – it is the tax applied to the value of your property by the state government, so the amount you pay will depend on where you live and the price you pay for your new home. First-home buyers receive a concession on stamp duty, but again this depends on the state in which they buy. NSW is the most generous with the First Home Plus Scheme, under which first-home buyers do not pay stamp duty on homes under $500,000 and receive a discount on homes between $500,000 and $600,000.
You need a lawyer to legally transfer ownership of the property you are buying or selling and they usually look after all the paperwork and conduct title searches as well as arrange strata inspections. Once again legal fees vary depending on your state, but can generally cost around $1000.
Once you apply for a home loan, the fees start to kick in. Different lenders charge different fees so it’s important you do your homework and be aware of what costs are involved. Most loans carry a one-off application fee – also called loan approval fee – which can range up to $1500. Yet RateCity lists more than 1400 loans with no application fee, so research your options before you apply for a loan.
Mortgage insurance – or lenders mortgage insurance – covers the lender for the amount you borrow in the event that you default on your loan. The lender will charge you this one-off fee typically if you have less than 20 percent deposit. The higher the percentage you borrow, the more you will have to pay in mortgage insurance, which can run into the thousands of dollars, depending on the value of the loan.
Another cost to include in your budget when buying a home is the cost of connecting electricity, gas and the phone line in your new home. In total, this can set you back a couple of hundred dollars.