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What's the real cost of buying your first home?

Jodie Humphries avatar
Jodie Humphries
- 6 min read
What's the real cost of buying your first home?

Buying your first home is a major milestone. It’s also a big financial commitment, with costs going beyond your deposit and the repayments you’ll have to make over the life of your loan. In this article we dig into the often overlooked costs of buying your first home, so you know exactly where your dollars are likely to go.

Upfront costs of buying a first home

Once you’ve secured your dream home, there’s a series of steps you’ll need to take before you can settle in - each incurring a cost. From setting up a mortgage and getting an inspection, to moving in, here are the upfront costs you should account for.

Loan application fee

Some lenders may charge you a fee to apply for a home loan, which means before you even get the green light on a mortgage you might have to fork out funds. If a lender has an application fee in place, it could be anywhere between $200 and $1,599.

Loan establishment fee

If your loan application is accepted, then you’ll generally need to pay establishment fees to get your mortgage set up with the lender. The amount will differ from lender to lender, so how much you pay will depend on who you decide to go with.

Mortgage registration and title transfer fees

Mortgage registration and title transfer are state government fees involved with formally registering a mortgage and transferring the property ownership. These costs will differ depending on where you live, with some state governments charging a set fee while others charge a fee based on a sliding scale.

Building and pest inspections

Before you sign on the dotted line and purchase a property, it’s in your best interests to get both a building and pest inspection conducted on your potential home. A building inspection will check for structural soundness, while a pest inspection will identify if there are any pests or pest-related damages that you should know about.

A typical pre-purchase building inspection for a four-bedroom home can cost anywhere between $400 and $500, while a pest inspection tends to be a little cheaper, ranging from $200 to $300. You may be able to save money by having the two inspections done together, so it’s worth looking into this if you’re trying to save some cash.

Stamp duty

Stamp duty is a state government tax on property purchases. The amount of stamp duty you have to pay will depend on where you live, as well as the value of your property.

While it’s possible to get an exemption or concession on stamp duty, if you do have to pay it, it can be thousands or tens of thousands of dollars, which is something to keep in mind (and in your budget) when looking into buying your first home.

Lenders Mortgage Insurance (LMI)

Planning on purchasing a property with less than a 20 per cent deposit? Your lender will likely charge you LMI, which protects the lender if you fail to meet your home loan repayments.

LMI is a one-time cost that’s added to your home loan and can therefore add thousands to the amount you owe. If you want to avoid paying LMI, it’s best to save a deposit of 20 per cent or more so you’re borrowing less from your lender and this added cost isn’t triggered.

Legal and conveyancing fees

When buying your first home, there’ll also be costs associated with having the sale contract, home loan document and any other legal paperwork prepared by a conveyance.

Moving costs

Once you’ve purchased your first home, it’s time to move in - and this doesn’t always come cheap. Unless you have a large vehicle and a group of mates who are all free at the same time, you’ll likely need to hire a removalist to transport your belongings from where you currently live, to your new place. Depending on the distance between the two locations, and how much stuff you have to move, this can cost you thousands of dollars upfront.

Renovating costs

Once you’ve found your future home, chances are you’ll want to make some changes to really make it your own. Renovating costs will obviously differ drastically depending on if you plan to improve just one room or the entire house, as well as the extent of the renovation - for example, adding some fresh paint and new flooring will obviously cost a lot less than knocking down a wall and creating an extended area so costs will come down to how grand your plans are.

Ongoing costs of buying a first home

It’s a big moment when you finally settle into your first home but, sadly, the costs don’t stop there. There are a number of ongoing expenses that you’ll have to pay to protect and maintain your dwelling, from insurance to utility services, so it’s a good idea to know what you’re on the hook for.

Home and contents insurance

It’s a logical move to protect your home (and what’s in it) considering how much you invested. Home and contents insurance is something you’ll have to pay as soon as or, in some cases, before settlement occurs. You may want to review the laws in your state or territory as they could affect when you, as the buyer, become responsible for insuring the property

The cost of home and contents insurance varies from property to property, so the exact amount you spend will depend on the place you buy.

Utility services

When it comes to costs, you’ll also have to take into account utility services such as gas, electricity, water and telecommunications, so you have everything you need for a functional home.

Strata fees

Is your first home going to be a townhouse or unit that’s part of a complex? If so, then you’ll probably be on a strata title. This means you’ll have to pay strata or body corporate fees, which are usually charged quarterly and can add up to several thousands of dollars each year.

Council rates

Another ongoing cost to be aware of is a tax to your local council every quarter. Council rates are based on statutory land valuations so will differ from property to property but you can expect to pay an average of $2,000 each year.

Why you should be across all these costs

It’s crucial to understand all the costs involved in buying your first home, so you're not left scraping the bottom of the barrel because you didn’t account for anything more than the deposit and repayments. Crunching the numbers and creating an effective budget will not only help you manage your overheads but will also help to reduce stress in the long run.

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Product database updated 27 May, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.