Home Purchasing Costs

There are hidden costs associated with buying a house that need to be considered and added into your budget. Planning ahead in this way prevents hidden surprises from popping up and allows you to continue to move forward as you are aware of all your expenses and costs.

Legal fees can be guaranteed, it is critical that each side involved in the property transaction obtain their own independent legal advice. The general cost for a solicitor to represent you when purchasing can vary between $600 to $1800 (sometimes more).

The buyer is responsible for obtaining a building and pest report on the property of interest at his/her own expense. A building and pest report should be able to be obtained for around $400. While we recommend that you always obtain a building and pest report, it is important to note that they are filled with disclaimers that protect them if they fail to detect defects in the property. What you are looking for is what they DO find wrong with the property.

There are Government expenses as well when purchasing property. Stamp Duty is a Government tax. The Act actually does not specify which side (the buyer or the seller) must pay Stamp Duty, the Act just states that Stamp Duty must be paid. Traditionally, the buyer has always covered the Stamp Duty costs, although it is possible to negotiate to have the seller pay all or pay of this expense.

If you are a first home buyer and the property that you are purchasing is under the threshold set by your local state Government, Stamp Duty is waived from being paid in these instances. If you have owned a property in Australia previously, you can expect to pay Stamp Duty.

The most important cost when purchasing a home is to ensure that you can afford the monthly mortgage repayments. Make sure that you have room to move when (not if) interest rates rise. This home purchasing cost is the most crucial. Its always best to budget for at least 4 - 6% above what the initial interest rate is on your loan, that way when interest rates go up you will know that you can afford the higher repayments.

When obtaining a bank loan, there will be the mortgage insurance premium to be paid by the buyer if the deposit is less than 20% of the purchase price (many non bank lenders will still expect you to pay mortgage insurance regardless). This cost is worn by the buyer but does not protect the buyer. Mortgage insurance protects the bank or lender should the buyer get behind in repayments and the bank/lender decides to foreclose and the property is short sold (meaning the property is sold for under what you owe to your bank or lender). Banks and lenders will not allow a mortgage to go through unless the loan is mortgage insured - there is no choice here for consumers with this buying cost (unless your deposit is over and above 20% of the purchase price. Your bank or lender will then "normally" cover this fee).

Ongoing purchasing costs include insurance and rates. Yearly insurance costs range from $200 to $1000+ depending on the value of the home and what suburb it is in. Council rates normally range from $1000 to $2000 per year. There are also water rates to consider and depending on your usage, you can expect to pay at least $1000 per year.

Moving costs are a consideration that need to be budgeted for. Many people make the move themselves, cutting out the large costs of paid labor, but still petrol costs and maybe the hire of a small van would need to be considered. There are many people though who do require the services of removalists, these services range depending on the amount of bedrooms and the house size. Many people pack and move the small items and clothing themselves, just leaving the heavy bulky furniture items for the removalists. Many removalists charge by the hour.

Setting up utilities is another cost for the buyer to consider. Setting up phone lines and internet access, getting the electricity on, etc are all small but necessary costs that are required with a home purchase.

There is much to consider and plan for when purchasing a home. The more that you take into account, the more prepared you will be for the costs involved with purchasing a home. You will then have less surprises, be less stressed and have a much happier experience when it comes time to move.

Our DIY Rent to Buy manual provides information on all costs associated with a home purchase, plus many non traditional ways to purchase a home, without the need for banks, real estate agents or investors. Each home purchase is documented in full detail with the steps included to enable you to implement your own home purchase.