The real cost of buying a home

The real cost of buying a home

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.


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.


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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Learn more about home loans

What fees are there when buying a house?

Buying a home comes with ‘hidden fees’ that should be factored in when considering how much the total cost of your new home will be. These can include stamp duty, title registration costs, building inspection fees, loan establishment fee, lenders mortgage insurance (LMI), legal fees and bank valuation costs.

Tip: you can calculate your stamp duty costs as well as LMI in Rate City mortgage repayments calculator

Some of these fees can be taken out of the mix, such as LMI, if you have a big enough deposit or by asking your lender to waive establishment fees for your loan. Even so, fees can run into the thousands of dollars on top of the purchase price.

Keep this in mind when deciding if you are ready to make the move in to the property market.

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

What is appraised value?

An estimation of a property’s value before beginning the mortgage approval process. An appraiser (or valuer) is an expert who estimates the value of a property. The lender generally selects the appraiser or valuer before sanctioning the loan.

What do mortgage brokers do?

Mortgage brokers are finance professionals who help borrowers organise home loans with lenders. As such, they act as middlemen between borrowers and lenders.

While bank staff recommend home loan products only from their own employer, brokers are independent, so they can recommend products from a range of institutions.

Brokers need to be accredited with a particular lender to be able to work with that lender. A typical broker will be accredited with anywhere from 10 to 30 lenders – the big four banks, as well as a range of smaller banks, credit unions and non-bank lenders.

As a general rule, brokers don’t charge consumers for their services; instead, they receive commissions from lenders whenever they place a borrower with that institution.

Does each product always have the same rating?

No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

  • Lenders have made changes. Our ratings show the relative competitiveness of all the products listed at a given time. As the listing change, so do the ratings.
  • You have updated you profile. If you increase your loan amount, the impact of different rates and fees will change which loans are the lowest cost for you.
  • You adjust your preferences. The more you search for flexible loan features, the more importance we assign to the Flexibility Score. You can also adjust your Flexibility Weighting yourself, which will recalculate the ratings with preference given to more flexible loans.

Mortgage Calculator, Loan Results

These are the loans that may be suitable, based on your pre-selected criteria. 

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

Mortgage Calculator, Repayment Type

Will you pay off the amount you borrowed + interest or just the interest for a period?

What does going guarantor' mean?

Going guarantor means a person offers up the equity in their home as security for your loan. This is a serious commitment which can have major repercussions if the person is not able to make their repayments and defaults on their loan. In this scenario, the bank will legally be able to the guarantor until the debt is settled.

Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

Mortgage Calculator, Repayments

The money you pay back to your lender at regular intervals. 

Mortgage Calculator, Loan Term

How long you wish to take to pay off your loan.