The Costs of Buying a new Home

‘Home sweet home’, a phrase we have been often hearing since our childhood days. Own home is always a sweet home, but such sweetness is increasingly becoming a pain-in-the-neck due to skyrocketing costs of living in Australia, paralleled with economic challenges of lower purchasing powers in the shape of decreasing disposable income.

The costs of buying a home in Australia are high. Experts and analysts suggest keeping a minimum of 10% deposit against your property price. For example, if your property is worth $500,000, you should have at least $5,000 deposit to get a home loan. Moreover, you also need an additional 5% deposit to cover other charges such as:

Minimum deposit

Legal fees (solicitors’, lawyers’, etc.)

State stamp duty taxes (vary from state to state)

Lender’s Mortgage Insurance charges

Property inspection charges

Home loan cost fees (varies depending on the lender)

Hiring a reliable real estate agent or broker for assisting you in purchasing the right property.

Utility connection charges (water, gas, electricity)

Throughout this article, we shall assume the property value to be at $500,000 in order to calculate its minimum breakdown of costs that the home buyers have to bear before purchasing the property. Here is the rundown analysis of all costs:

1. Minimum deposit – For the $500,000 property value, the minimum deposit is roughly in between 5% to 7%, ($25000 to $35000) as no bank is allowed to provide a 100% home loan. All Australian banks are tightening up their home loan policies and require a deposit to be made. Moreover, the type of home loan along with the terms and conditions could also change your costs of buying a new home. You might want to get a fixed loan during recessionary times so that the interest rate locks in for the entire duration.

2. Legal fees – Every property transaction involves legal matters that only property lawyers can handle and of course, there is a certain cost associated with it. These fees can be anywhere from 1% to 2% of the total property price but could be more than the maximum range in some states. The fee on our case is $500 to $600 range in most of the states, with minor price differences to take place. Among the legal fees, there is also another additional service charge of solicitors. Since the documentation & settlement process can be a daunting task, you might not be able to handle it all on your own. For this purpose, the handling and processing of the property documentation are charged anywhere in between $500 to $1700.

3. State Property Taxes & stamp duties – These duties & taxes differ considerably from state to state and property to property. Stamp duty is the tax paid upon the property purchase price and can be categorized as one of the biggest expenses of buying your new home. Stamp duty goes to the government’s treasury department is spent on funding public goods such as education, medication, and other basic facilities. Usually, the stamp duty is often paid in the following estimates:

Est. $2000 to $4,000 for $100,000 property

Est. $4,600 to $6,000 for $200,000 property

Est. $14,000 for to $17,000 for $400,000 property

For exact stamp duty and property taxes, refer to your state government laws. Some states might offer you low stamp duties, whereas others completely waive it off if you are buying a home for the first time.

4. Lender’s Mortgage Insurance – If your borrowed amount is over 80% of the purchase price, then you are also subjected to Lender’s Mortgage insurance charges. This insurance is always for the protection of the lender in case the borrower gets defaulted or not able to repay the loan back on time.

5. Property Inspection charges – Buying a new home does not make it compulsory for the purchaser to inspect the property, but since this is a once in a lifetime decision, it is a wise choice to make costing anywhere from $400 to $500.

6. Other costs – Home loan costs, hiring a real estate agent cost, and utility connection charges are varied among various states due to which you should consult your state government rules.

Learn more:

A guide to the cost of Home Purchase – online, NSW Family and Community Services

The costs of buying property – online, REIQ

Planning to buy property – online, Consumer Affairs Victoria