Understanding the costs of buying property

There is little doubt shopping around for a great home loan and saving a substantial deposit are central to buying a home, but these are not the only financial factors you need to consider.

Determining if you are financially ready to buy requires an understanding of your pre-purchase, transaction and post-transaction costs. This may include property buyer services, mortgage establishment fees, building inspection charges and the ongoing costs of owning a home.

Pre-transaction costs when buying property

The amount of time you have to search for the right property and the type of sale transaction – whether auction, blind auction or private treaty – will affect your pre-purchase costs. These may include:

• Buyer agent fees: Buyer agents locate and purchase property on a buyer’s behalf for a fee. Buyers often engage the services of a buying agent when they don’t have the time to look for a property or are not comfortable managing the purchase process.
• Building inspections: Pre-purchase pest and building inspections need to be conducted before you bid at auction, or during the cooling-off period after the seller has accepted your offer if you are buying by private treaty. Not all private treaty purchases have a cooling-off period – in that case, you would conduct your pre-purchase inspections prior to signing the contract of sale.
• Legal and conveyancing fees: You’ll need to pay a legal professional or conveyancer to conduct title searches; make a strata report (if buying a townhouse or unit); review a contract of sale; check encumbrances, covenants and easements; and negotiate settlement details. If you are buying at auction, these processes need to take place before you bid. If purchasing by private treaty, they’re conducted during the cooling-off period. Some conveyancers charge a flat fee, while solicitors commonly charge by the hour. The amount you pay will depend on the complexity of the transaction.
• Financial fees: These can include a loan application or establishment fee and a valuation fee.
• Valuation: You may choose to arrange your own valuation of the property. Always use an accredited valuer.

Property purchase transaction costs

Once the hammer has fallen at auction, or you have signed the contract on a private treaty sale and the cooling-off period has begun, you are on your way to settlement and home ownership. The following expenses can be expected at this point in the sale process:

• Deposit: At the exchange of contracts you pay a deposit, which is a certain percentage of the total cost of the property. This will generally be placed in a trust and transferred to the seller at settlement.
• Balance: The balance of the purchase price less the deposit will be paid at settlement.
• Lenders mortgage insurance: If you borrow more than 80 per cent of the property’s purchase price, your lender will require you to take out lenders mortgage insurance.
• Stamp duty (or transfer duty): Property purchases in Australia are subject to a government stamp duty, also known as transfer duty. It is charged at different rates depending on which state the property is located in. Concessions are available to some buyers but, generally, stamp duty is considered one of the largest single home-buying costs. The due date for stamp duty payment varies from state to state.
• Related: stamp duty calculator
• Property purchase registration fees: A Transfer of Land needs to be lodged by your legal representative with the State Titles Office.
• Mortgage registration fees: New mortgage agreements need to be registered with the state authority government.

Ongoing property ownership costs

You’ve found and bought your property – what costs can you expect next?

• Mortgage repayments: The principal plus interest charges and lender fees.
• Moving home costs: Refer to our Moving Home Guide for extensive hands-on tips.
• Home and contents insurance: There are strategic ways you can reduce your home’s insurance costs.
• Council rates and/or strata fees: Here are some surprise tips on managing council and strata fees.
• Utility costs: It is possible to cut your water, gas and electricity bills.
• Required renovations: One way to reduce renovation costs is to do it yourself!