Back to Inspire Home

A guide to the upfront costs of buying a home

Yes, everyone is well aware that buying a home is an expensive process. But with so many extra costs on top of the actual amount for the house, you need to have your finances in order to avoid any costly surprises.

In some cases, the upfront costs for a property valued at $400,000 could be up to 11% of the property's value.

To make sure you’re not caught off guard with hidden fees, we’ve listed all of the upfront costs to look out for when purchasing a property:

#1. The property itself

Let's start with the big one!

The largest and most notable expense will be your property deposit. Of course, this cost will vary depending on location, size, space, location and the owner’s own valuation of their property.

When negotiating the purchase price remember that some additional costs (e.g. stamp duty, LMI) are based off a percentage of the property value. So, not only would you be saving for the actual property cost, but also helping reduce additional costs later down the track.

Most buyers aim to save 20% of the purchase price to avoid any extra charges such as Lenders Mortgage Insurance. However, it’s hard to have that kind of savings, especially in Australia's capital cities, so there are other options available if you don’t have that 20% deposit saved.

Depending on your situation and the specific lender, some lenders provide loan for borrowers with as little as 5% deposit, but keep in mind you're likely to pay Lenders Mortgage Insurance (LMI) with a low deposit, which we will talk about next.

#2. Lenders Mortgage Insurance

Lenders Mortgage Insurance (LMI for short) is a flat fee that is usually required to be paid to a lender if your deposit for a loan is below 20% of the property's purchase price.

The LMI exists as a protection for lenders should you (the borrower) be unable to pay off your loan. It’s an extra cost that can be avoided by regularly saving and paying at least 20% of the property’s value. See if you might need to pay LMI using our LMI calculator.

The payment is usually 1-3% of the property’s value and does not go towards repaying the home loan, it is generally paid on top of your monthly repayments to your lender.

Will you need to pay LMI?

See how much you might need to pay if you're low on a deposit.

Calculate LMI

#3. Stamp duty

Stamp duty is a once-off fee or tax you are required to pay when you purchase property or land. This tax is enforced by the state and territory government, so it varies depending where the transaction occurs.

See what the stamp duty rules and rates are for your state or territory.

For example, a $400,000 property’s stamp duty in NSW will range from $16,000 - $20,000, which is about 5% of the property value.

There are some exemptions depending on which state you live in. For example, first time home buyers in NSW and QLD are exempt from stamp duty fees, as well as ‘off-the-plan’ properties valued up to around $600,000.

Stamp duty is perhaps the largest additional cost after the purchase of a property, so make sure to take this tax into account with any purchase of a property.

Calculate your stamp duty in seconds

Find out how much stamp duty you might need to pay.

Calculate now

#4. Legal fees

The transfer of property contracts can involve complex legal requirements, so it is worth considering hiring a conveyancer or solicitor to act as your legal representative and make sure all the documents are up to scratch.

Conveyancers are generally more affordable than solicitors as their expertise is specifically the conveyancing process while solicitors may be needed in more complex property transfers. The NSW Housing guide states that conveyancers usually charge from $800 - $2,500.

In most cases, conveyancers will be able to get the job done and they usually charge a flat fee compared to solicitors that are likely to be paid on an hourly basis.

#5. Home loan application & establishment fees

When you apply for a loan, some lenders will charge a fee for establishing the loan with the price varying from lender to lender. These costs range from $0 - $1,000.

Additionally, there might be extra costs for preparing and registering a home loan with the lender. These might include the valuation fee and survey report as well as the lender's own legal fees.

Make sure you consider all fees while comparing home loans. Additionally, if you think you might refinance in the next few years, look for a loan that has affordable exit fees when switching lenders. Ask your Home Loan Specialist for help negotiating these fees.

If the exit fees are high, it can make it more difficult to get out of a loan and force you to stay in a mortgage that doesn’t work for you as your needs change.

#6. Property inspections

builder-inspecting-property

Before purchasing a property, your conveyancer or lender will usually require a property inspection to make sure that the home is in good condition and structurally sound.

The usual inspections include:

  • Building inspection - This looks at the structure of the house and makes sure there are no issues with the skeleton of the house as well as any visible defects that need to be repaired. Cost: $300 - $700
  • Pest inspection - A pest inspection ensures that there are no pests inside the property currently, as well as finding out whether there have been any pest infestations previously. Cost: $200 - $350
  • Strata inspection - According to the NSW Business website, “A strata inspection examines and reports on the written records of the owners’ corporation. It is additional to the certificate that the seller supplies, providing relevant information about strata levies, insurances.”. Cost: $200 - $350

#7. Moving fees

If you’re planning to move into your new house, there are multiple different fees you’ll need to take into account. These include:

  • Removalists - Depending on how far you are moving and how much furniture you have, removalists can costs upwards of $150 per hour.
  • Connecting phone line - Approximately $59 (where phone was connected previously) $299 (where phone was not connected previously).
  • Connecting internet/broadband - Connection can cost $99 upwards, while professional installation in a newly developed area can cost around $140.
  • Electricity connection - Some providers will charge approximately a $180–$200 security deposit for new customers.

Ask us anything

If you have any further questions regarding the hidden costs of buying a home, choose a time to chat with one of our Home Loan Specialists.

Tags: lmi (lenders mortgage insurance), stamp duty, legal fee, establishment fee, home inspection, pest inspection, building inspection, first home, new purchase

Afraid you're not getting the best home loan?

Search over 30 major Australian lenders in seconds.

Find a better deal

Dreaming of purchasing a new home?

Find out how much you could borrow with our calculator.

Calculate now
How much is your home worth?

How much is your home worth?

Get a free online property valuation with local sale and suburb statistics.

Get your property report

Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856, Credit Representative 518849), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of lenders including ClickLoans, a related body corporate of Auscred Services. Although Lendi compares over 1600 products from over 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
Made with love at Circular Quay in Sydney, Australia. © 2019. All rights reserved.