Buying a property is the biggest purchase most of us will ever make – it’s a major decision with a major price tag. But the amount you pay for the house isn’t the only cost associated with purchasing a property. In fact, there are many hidden costs that you need to be prepared for while organising your finances.
Let’s look at some of the extra costs that you might encounter during the buying process.
The government charges a tax for transferring a property from one party to another. Called stamp duty or transfer duty, the cost will vary widely depending on a number of considerations such as the state the property is located in, the cost of the property, and whether you plan to live in the property or are acquiring it as an investment.
There are some cases in which you could be exempt from stamp duty, such as being a first home buyer in Queensland purchasing a property with a value less than $550,000. Calculating how much stamp duty you could be required to pay can be complicated, so speak to one of our experts for some guidance on how much you might need to budget for.
Lender’s Mortgage Insurance
If you are borrowing from a mortgage lender with less than a 20% deposit, the lender considers your mortgage to be a higher risk and will require that you take out Lender’s Mortgage Insurance. It’s there to protect the lender in case your property decreases in value or if you were to default on your mortgage.
Your LMI will be calculated based on the percentage of your purchase price that you can offer as a deposit – the higher your deposit, the less LMI you’ll be required to pay. Your lender will be able to advise how much that could add to your mortgage repayments.
A property might look great on the surface, but you need to be sure there are no hidden issues that could come back to haunt you. You’ll need to get a professional to look over the place to confirm that there are no unexpected problems that could crop up later.
Building inspections are vital for assessing the structural integrity of the home with an experienced eye that can identify existing issues or potential issues that could come up in the future. In addition, you’ll need to get a professional to check for pests. Not only will they look for hygiene hazards like cockroaches and rats, they will also check for problems like termites and bedbugs that can turn the purchase of a property into a drawn-out nightmare.
As houses age they are more likely to have pest and structural problems, so it’s particularly important that they are carefully checked before you make the decision to purchase. Some companies offer a combined building and pest inspection service to save you hiring them separately. Inspections could cost you around $1,000 – but are nothing like as costly as moving into a home with ongoing structural or pest issues that you didn’t previously know about.
Formally registering your mortgage is a legal requirement, and it comes with a fee of somewhere between $100 – $200. You could also be charged additional fees by your mortgage lender, such as a mortgage establishment fee that could potentially cost around $500. You’ll need advice specific to your situation, so during the process of taking out a mortgage it’s important to discuss any extra costs with your lender.
Legal documents need to be professionally created to help you avoid any potential financial liability in the future. A professional conveyancer can also ensure that the sale is legal and correct, completing property and title searches on your behalf. Your legal costs are likely to be somewhere between $1,000 to $2,000.
Leaving your old home
Moving out of your old property can be expensive, and not everyone has included those costs into their budget. Renters will need to check the specific requirements with their property manager, but are likely to need a bond clean, professional carpet clean, professional pest treatments, and to complete repairs of any damage done to the property during the tenancy. Depending on requirements, leaving a rental property can cost anywhere from hundreds to thousands of dollars.
The moving process itself also needs to be factored in. From a moving company who handles the process from start to finish to a DIY process where you box and move your possessions yourself, you’ll need to consider how much it will cost you in time, effort and fees to decide on the best strategy. If you choose a moving company to assist you, shop around and make sure you have guarantees in writing to protect you through the process.
Arriving at Your New Home
To help ensure a smooth transition to your new home, it helps to think ahead to the costs that might be waiting for you in the new place. You will have organised your utilities, insurance, and the basics you need to get started in your new home.
The previous owners might not have left the place at your preferred level of cleanliness – be prepared to get cleaning or perhaps pay someone else to do it for you. You’re also likely to find cooking meals a tricky task while you’re still living out of boxes – accounting for some takeaways is a good idea to make the process less stressful.
It shouldn’t be an immediate concern, but council rates will be due at some stage – the previous owner will have paid up until the end of that quarter, and then you will be responsible for those ongoing fees.
The True Cost of Your Home
The sale price of your house is going to be the biggest figure for you to consider, but there are other smaller costs that can add up if you’re not expecting them. Arena property agents are experts in their field, and our aim is to work with you through your purchasing journey to keep you informed and empowered to make the best decisions for your personal circumstances.