Understanding the costs
Because no one likes these sorts of surprises!
The full range of costs will depend on a number of factors, including whether you’re buying or building and if you have an existing property to sell.
You need to consider:
- government stamp duty and transfer fees (you can get an estimate with our calculator)
- government search and mortgage registration fees
- conveyancing and legal costs
- loan application fees and set-up costs, which may depend on the type of loan you need
- lenders’ mortgage insurance premiums if you need to borrow more than 80% of the value of the new property (see below
- removalist’s fees and set-up costs for the new place
- marketing costs and agent’s fees if you’ll be selling an existing property
- the cost of bridging finance if you plan to buy before selling your current home, or the cost of short-term renting if you plan to sell your current home first
- new furniture, if your existing furniture no longer meets your needs.
If you’re buying an existing home, you’ll also want to factor in the costs of pest and building inspections. This is an essential step, as trying to save a few hundred dollars here could cost you thousands in the long run.
If you’re building, you’ll also need to consider:
- architect’s fees, if you’re building a custom design or on difficult terrain
- soil and contour tests and site costs (not surprisingly, site costs are likely to be higher if your soil is poor or the contour means it’s going to be a difficult build)
- the cost of any essential items not included in your building contract, which could include landscaping, retaining walls, paving, driveways, blinds and more – be sure that you understand exactly what’s included before you sign the building contract!
Loan costs and set-up fees
These days it’s not too hard to find a home loan that doesn’t come with an upfront application fee, but that may come at the expense of flexibility. You also need to be aware that other upfront costs may apply, including valuation and settlement fees.
Lenders’ mortgage insurance (LMI)
LMI is not a bank or credit union charge, but is typically lumped in the category of set-up costs. It can be very expensive if you need to borrow more than 80% of the value of the property and gets more expensive the higher the percentage you need to borrow (known as the loan-to-value ratio, or LVR). Even saving enough to get the LVR below 90% can make a big difference and save you thousands.
Alternatively, you might want to consider a family guarantee as a means of avoiding this cost if you have a family member with enough equity in their home.
This is general advice only and doesn’t take into account your objectives, financial situation or needs.