Beginning the hunt for a new property is a very exciting time!
However, keeping in mind that in the past two years, the average Australian house price has leapt more than 30%, it is very important that you keep in mind the following costs and extras that could end up totalling tens of thousands.
Failing to consider these could mean stretching your budget and adding unnecessary pressure to your finances at the very least. Ultimately, you could end up being caught short and unable to cover the repayments you committed to.
The charges you will surely want to look at to avoid this from happening include:
- Stamp duty;
- Transfer fees;
- Building and pest inspections;
- Mortgage registration;
- Conveyancing and legal fees;
- loan application or establishment fees;
- Lenders Mortgage Insurance; and
- Council rates
Since every State and Territory has different levy amounts and exemptions, please keep in mind this list isn’t exhaustive. Instead, it represents an overview of the main hidden costs you should consider. Regardless of where you are, making sure you double-check the levy rates is a smart decision.
Generally, the cost of your home will determine whether you are eligible for discounted fees, so if you’re unsure about what that might mean for you, contact your dedicated Rise High mortgage broker to find out!
Let’s explore these costs and fees in greater depth…
Have you encountered stamp duty before? If so, you know it’s a fee that appears as if it came out of nowhere. It also happens to be no small fee either!
The history of stamp duty dates back to the 1800s when Australian governments stamped transfers of title deeds. These were used to track ownership and ensure people were buying from the rightful owner.
Today, represent a major source of revenue collected by the State and Territory governments.
Depending on the state you are currently living in, you may have access to a discount as a first home buyer or owner-occupier buying off-the-plan. Since these benefits are usually restricted to properties priced way below the market average, they can sometimes be tricky to access. Making it work will however reward you with some major savings!
Although every now and then we hear rumors about stamp duty getting abolished, our best advice is not to get your hopes up. We all know taxes are a constant, and even when they occasionally get abolished, they do so to appear again further down the line. The ACT and NSW are great examples of this. Being halfway through a 20-year transition plan the ACT is currently transitioning from stamp duty to property tax. Similarly, NSW is proposing reforms on an opt-in basis, allowing buyers to choose between stamp duty or an annual land tax upon purchase.
Building and pest inspection fees
Who wants to buy a property and find out later on that it has issues or a hard-to-manage infestation? Definitely not us, and neither do you! Getting a pest and/or building inspection is becoming increasingly common for good reason.
These inspections are important to discover structural issues, damage or problems a property may have, and often come with fees attached. When thinking about this hidden cost, you will want to consider that depending on the type of inspection you would like to perform on your property, you could be looking at spending a budget above $500.
Mortgage registration and transfer fee
Wondering what these fees are all about? They exist to cover the administrative costs that come with linking mortgages and land titles.
In other words, they exist to prevent homeowners from selling up without repaying lenders and are what stops you from getting a title transfer for your property if it is still linked to your existing mortgage.
We understand that this can be confusing, but let us make the complicated uncomplicated. The Mortgage registration and transfer fee just imply that you need to own your property outright, or have the mortgage discharged (and paid the Government’s mortgage discharge fee) before you can think about transferring the title. Is this one of your future considerations? If so, this fee might be an important one to keep front of mind.
Conveyancing and legal fees
Other essential fees to consider during your house purchase include those related to the preparation of legal documents. Very Important!
Known by the term “conveyancing”, these can be obtained with the assistance of a conveyancer, solicitor or even the builder or seller (if you’re looking to save money).
These legal documents dot those i’s and cross those t’s to ensure the exchange of money and titles rules smoothly. In working with a conveyancer you can expect their duties to include anything from conducting land title searches and checking details on the contract of sale, to organizing when payments need to be made for settlement.
Loan application and establishment fees
We are sure you will like these. They represent some of the smaller fees in the hidden costs of buying a house saga!
Loan application and establishment fees are one-off payments that cover the costs of processing documents to set up your new mortgage. They may include valuation fees for your new property, and establishment fees that are often waived by your lender.
In working with your dedicated Rise High broker, we can help you assess the exact cost of these so you can easily budget for them!
Lenders Mortgage Insurance
Let’s discuss this popular cost you most likely have already heard of.
Lenders Mortgage Insurance (or LMI in short) is generally applied when borrowers have less than a 20% deposit for the purchase of their property. Although borrowers often believe it protects the, it really only protects lenders in the case that borrowers default, and are paid as premiums by the borrowers themselves.
If a mortgage holder defaults on a loan and the property is sold, LMI helps pay out the balance left over if the sale price doesn’t cover the outstanding loan.
In some circumstances, government grants can help you bypass LMI. Your dedicated mortgage broker can provide greater insight into this to make the most of your hard-earned money!
The final costs we could surely not steer clear of are council rates.
You will need to pay these pro-rata to cover the quarter in which you bought the property. Essentially, they are taxes.
When thinking about these, you must keep in mind that they do not include the fees incurred to connect the utilities, and must therefore be budgeted separately.
Those were a significant amount of additional costs to consider! However, as long as you’re talking to your Rise High broker throughout the process, you can remain confident to be kept in the loop and have clear expectations about what to expect.
Purchasing a property should be an exciting time, and as long as you’re prepared and have the right team and insights, you’ll be ready for any hidden costs of buying a house. Learning how to be house price negotiation-ready, can also come in handy!
Would you like to talk to one of our award-winning brokers to ensure a stress-free experience? We would love to help you explore your home loan, construction loan or even investment loan options! Just leave your details below and one of our friendly team members will be in touch with you shortly!