Understanding the total cost of buying your first home

We all know that buying a new home comes with a hefty amount of bills but do you really know the extent to which you’ll need to save? If you’re a first home buyer lucky for you the Federal Government gives out incentives and grants like the First Home Owner Grant, however, this doesn’t mean buying a house won’t be a heavy weight on your savings account.

It’s not just the purchase price of the property that you need to factor, you may be spending up to 11% of the purchase price on incidental costs.

You need to be factoring this into your budget so consult with your broker or your bank so that you’re clear on whether the final number you’re paying includes everything or just the home itself. This week at Frollo we’ve broken down some of the costs you could be looking at when buying a home.

Conveyancing & legal fees

Estimation: $1800

Unless you have experience in the industry you shouldn’t be leaving it up to yourself to review the legal aspects of buying a property. You need to hire a conveyancer or solicitor to provide advice so you’re not in the deep end later on.

Stamp duty

Estimation: About 5% of the property

Depending on your state and the price of the property, stamp duty can cost thousands of dollars, increasing with the buying price. If you’re buying your first home there can be some exemptions that you should research during consideration.

On a $500,000 house, first home buyers will pay nothing in Victoria, New South Wales and Queensland, while for those buying subsequent homes, they can expect to pay between $8750 (Queensland) and $21,970 (Victoria) on a house at that price.

Use a stamp duty calculator to get a rough estimate on the property you’re looking at.

Pest & building inspections

Estimation: Around $600

You don’t want a roach-infested property as your first home so getting the place checked out can save you thousands down the line. You should especially consider hiring a pest inspector for older homes to check for more serious issues such as termites.

Mortgage registration & transfer fees

Estimation: Between $100 and $200

This includes registering your mortgage and transferring the property under your name. These fees vary by state but you’re looking at a few hundred to a few thousand depending on the size of your property.

Loan application or establishment fee

Estimations: At least $500-600

So you’ve found the right home loan for you but you won’t just be paying off the loan itself, you’ll need to pay to apply for and set up the loan.

While the application fees are generally around $500-600, they can be more than $1000, depending on the loan and lender.

It’s worth noting that some lenders will waive this fee under certain circumstances, so it’s worth asking.

Mortgage insurance

Estimation: Depends on the size of your deposit

If you’re taking out a loan for more than 80% of the property price, most lenders require you to pay mortgage insurance.

This cost changes depending on what you’re willing to pay upfront.The smaller your deposit, the more insurance you’ll pay. On a $500,000 home with a 10% deposit ($50,000), you’ll be asked to pay insurance of around $8000.

But this insurance does allow buyers to purchase a home with as little as 5% of the purchase price as a deposit.

Home and contents insurance

Estimation: From $1500

A vitally important cost that you should have in place as soon as (or slightly before) settlement occurs. The cost of home and contents insurance varies from property to property.

Moving costs

Estimation: From a few hundred to $1000 depending on how far you’re moving

You might not be thinking about the costs of actually moving over the excitement of settling your loan or winning at the auction but it can pile on top of all these additional costs. Moving costs depend on how far you’re moving and how much stuff you own. Save money by packing and unpacking yourself and shopping around for a competitive rate.

 

 

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Frollo is a purpose-driven Australian FinTech on a quest to help people feel good about money. We’ve built the simplest way to help people get their finances on track – and through our business ecosystem, we’re supporting our enterprise clients to do the same for their customers.

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