Costs of buying a home

Assess the costs of buying a home

When buying a house and considering how much you can afford to spend, it is important to be aware of all associated costs of buying a home. 

There are a number of costs associated with buying a home that are outside the price of the house. Use this guide to help calculate what you'll need to pay. 

What costs are involved in buying a home?

• Stamp duty
• Your legal costs
• Searches and inspections
• Lender's Mortgage Insurance
• Rates
• Building insurance
• Body corporate fees, sinking funds and liability insurance

Stamp duty

Stamp duty is a State Government tax that varies by state and territory.  There are two types of stamp duty which may be payable:

• On the mortgage – The amount of stamp duty payable on your mortgage depends on how much you borrow.
• On the property – The cost of this stamp duty depends upon the price of the property you are buying.

Use our handy Stamp Duty Calculator to determine how much stamp duty you will pay. Or your local Stamp Duties office can provide you with information on how much stamp duty you have to pay, how it is calculated and if you are entitled to a rebate, exemption or deferred payment.

Your legal costs

Many of the costs associated with buying a property are non-negotiable. Your main legal cost will be for conveyancing, which is the transfer of property from one person to another. Conveyancing fees vary depending on where you are and where you are buying. Ask your solicitor/conveyancer/settlement agent to give you an estimate.

Searches and inspections

You should not exchange contracts to purchase a property until you have had all the necessary searches and inspections done. If a "cooling off" period applies to your contract, you may be able to have the inspections and searches completed between the exchange of contracts and the end of the "cooling off" period. Your solicitor/conveyancer/settlement agent should advise you as to what searches and inspections should be carried out.

Searches and inspections may include:

• Building inspections - The cost depends on the type of property (eg size) and detail required in the report. The written report should detail any flaws, including problems with damp and the structure of the building and roof.
• Structural inspections - This visual inspection examines the existing condition of the property's foundation, bearing walls, beams and columns, floor, framing, crawlspace areas, and drainage.  These areas are checked for deterioration and damage and then recommendations for repair may be made.
• Pest reports - Although this seems like an unnecessary cost now, it is a small price to pay when compared with the price of possible building repairs at a later date. This report should detail any evidence of past or current pest infestation in the property, such as ants and, if required, any recommended treatment.
• Surveys - This may be requested by your legal representative to check the position of the house and its boundaries, and confirm that the house is built on the correct block. It will also confirm whether or not it has been built in accordance with local council requirements.
• Title searches – Your legal representative undertakes this search. For a small fee, a title search and report provides details of the property owner, confirming that the seller has a saleable interest in the property. It also shows any easements, or recorded legal rights to the property (for example, a neighbour or the local council may have been given legal access to a portion of the property for a particular use). A title search can also determines if the property has any existing liens, which need to be finalised at closing.

Lender's Mortgage Insurance

There are a number of variables that influence whether or not lender's mortgage insurance is required. Generally, it is required if you are borrowing more than 80% of the value of the property, however this condition varies depending on property type, location of the property, loan type, etc. Lender's mortgage insurance protects the lender, not the borrower(s), against loss in the event that you default on the loan. This should not be confused with mortgage protection insurance for borrowers. In the case of foreclosure, if the property is subsequently sold by the lender at a price that does not cover the outstanding amount of the loan in full, lender's mortgage insurance will cover the difference in the debt still owed to the Bank after the sale of the property.

Rates

From the settlement date, you are responsible for all the council, water rates and levies on the property you purchase. You may have to reimburse the previous owner on a pro rata basis for any payments they have already made. Your solicitor/conveyancer will work these out for you.

Building insurance

The responsibility for insurance and risk of loss can vary in each State/Territory, so it is wise to check with your legal representative as to exactly what type of cover you will need. It's important to remember that, at the latest, you must have the building insured before the settlement date otherwise St.George may not make your loan available. However, it's best to insure the property as soon as you exchange contracts to purchase the property. You will also need to maintain suitable adequate insurance cover during the term of your loan. St.George can assist in providing this interim cover from the time of exchange of contracts until the date of settlement and ongoing.

Body corporate fees, sinking funds and liability insurance

When purchasing into a property that may have one or more owners such as strata title property(s), you need to make allowances for a range of additional ongoing costs involved with the maintenance and insurance of the property. These include body corporate fees, contribution to sinking funds and liability insurance to cover any damage to the building and common property.