A few weeks ago, I published a guest post from Roni at Mortgages, Money and Me and it went down so well we decided to put a follow-up post together to answer some of your questions. When I asked in my Facebook group, it seems the main questions many of you have is around the issues of costs involved in buying houses in Australia. You asked: How much to buy a house in Australia? And Roni has answered your questions in this detailed post.
Stop feeling bamboozled about conveyancing fees and inspections, and learn about the upfront buying costs plus the ongoing costs you need to budget for when buying property in Australia.
If you have plans of buying a house in Australia, it’s well worth signing up to Roni’s free guide – Buying a House in Australia. It answers everything you could ever need to know about buying your new family home in Australia. Buying a house in Australia is TOTALLY different to buying in the UK, so there is a lot to learn. Make sure you >> Sign up here <<
Costs of Buying a House in Australia is a sponsored post by Mortgages, Money and Me
Buying a house in Australia
When looking at house prices it’s also important to consider your TOTAL cost to buy a house in Australia, including any hidden fees.
In addition to the actual purchase price, costs associated with buying a house may be split between upfront and ongoing costs. There can also be hidden fees when buying a property, and these can be fairly negligible (such as a home loan application fee), to quite significant with Lenders Mortgage Insurance.
Generally speaking, if you are not eligible for the First Home Owners Grant then allow 5% of your purchase price to cover average conveyancing fees and government costs. This does not include lenders mortgage insurance, but if it is applicable it can often be added to the loan amount.
It is important for you to find out all fees associated with buying a house in Australia to make sure that you have enough cash to complete your purchase.
Upfront Buying Costs
The upfront costs are the costs you will need to cover before or at the time of settlement (transfer of ownership) of your purchase and they include;
Land Transfer Stamp Duty and Government Costs
Stamp duty is a state tax on property purchases and typically runs into many thousands of dollars unless you have an exemption under the First Home Owner Grant. The amount of stamp duty that is payable varies state by state, so be sure to use a stamp duty calculator to estimate what yours will be. This is potentially the largest hidden cost of buying a property in Australia.
You will also have minor government fees to register the transfer of land, and registration of mortgage. These fees vary from State to State but in most cases are just a few hundred dollars. Your conveyancer and mortgage broker will help identify these for you.
Lenders Mortgage Insurance
Lenders Mortgage Insurance (LMI) is another significant hidden cost of buying a home in Australia and is likely to be applicable if you need to borrow more than 80% of the total value of the property.
This is a single upfront premium that insures your lender against possible loss should your property need to be repossessed and sold due to loan default. It can be quite a significant cost and varies depending on the lender, loan amount and ratio to property value. Note that this insurance only covers the lender, not yourself, and if there is a loss then you are still liable for the debt to the mortgage insurer. For the loan to proceed, the insurer will need to approve the application and be willing to provide the lender with insurance.
However, if you do not have the full 20% deposit then Lenders Mortgage Insurance may help you enter the market sooner. The cost of the insurance can be substantial and is calculated on a sliding scale, so the more deposit you have the cheaper this premium will become.
NOTE: Special Niche for Doctors, Engineers and other professionals: Certain lenders will allow a loan up to 90% of property value without mortgage insurance. This can be a significant saving, so see if you are eligible for this special treatment.
Home loan application fee
A loan application or establishment fee can be as much as $1,000 or more. That said, most loan packages tend to have lower if not negligible upfront costs – but include an annual fee that is typically just under $400. These loans normally have interest rate discounts and added services that make the cost viable, but they are not suitable for everyone. Other loans have the higher upfront costs, and may then be fee free for the life of the loan, but have limited other benefits. Your broker or lender should fully discuss your options as they apply to your own circumstances.
Valuation and lenders legal fees
The lender is likely to require the property you are buying in Australia to be valued by a registered valuer to ensure you are paying what it is worth. The valuation fee, usually about $300 will normally be incorporated into the application costs. Some lenders may also charge a separate fee for their legal costs – up to $500 generally. Once again, your broker or lender can discuss your options and explain what is covered under the bank’s fee structure.
Conveyancing costs in Australia
The process of transferring the property you buy into your name legally is called conveyancing. Your legal representative may be a solicitor, a conveyancer or a settlement agent. House conveyancing fees vary depending on location, type of property, and even between different legal representatives. You should obtain quotes as conveyancing and solicitor’s fees for buying a house in Australia can vary considerably.
Building, pest and strata reports
It is wise, but not compulsory, to do a pest and building report on the property to check for structural faults or pest infestations which may not be visible or evident on the surface. Allow approximately $200 to $500 for each report. Termites are a common pest, especially in houses for sale in Perth Australia, but can be easily identified and damage can be treated.
If buying a unit, townhouse or villa you should look at the records of the body corporate or arrange for your conveyancer/solicitor to do this for you. For example, you can discover whether all owners get along, whether there any special levies due or being discussed which could cost you sometimes thousands of dollars, are you allowed to keep pets etc.
These extra costs to buying property in Australia are ones you may have encountered before if you had previously owned or have been renting. Otherwise, make sure you include these costs in your monthly budget!
Phone, electricity and internet
You may have to pay a bond to have these services connected, and you will need to pay for your ongoing usage.
This is payable to your local water authority. You will pay for the water service and for the water consumption.
The rates will vary depending on your council area and property.
Insurance – building and contents
If your new home is part of a body corporate (strata titled property), the premium for building insurance may be incorporated with your strata levies. You should think about adding home and contents insurance as well through private insurance.
You will have to pay for any ongoing maintenance on the property.
Strata or Body Corporate fees
Strata titled properties typically relate to apartment and unit developments. The fees will vary depending on the building complex. Things which can impact on the strata levies can be the age of the building, whether it has a lift, swimming pool or other such facilities, the number of units in the block, the size of your unit etc.
Check also to see if a special levy is scheduled for a future date. These typically cover major repair costs in apartment and unit complexes.
As we can see, the advertised house prices in Australia are just the starting point, and it is critical to consider the additional and hidden costs to buying your new home.
Please don’t be overwhelmed by what seems to be a costly or complicated process. Finding and owning your new home in Australia should be an exciting journey so please feel free to ask any questions so that I can help you!
Don’t forget to sign up to receive Roni’s free ‘Buying a House in Australia’ guide >> Get it here <<.
Roni also has a closed Facebook group where you can get lots of personal advice about buying a home in Australia >> Join the group now.
About the Author Roni Gors:
Hi, my name is Roni and I am the Owner of Mortgages, Money and Me, a Finance Brokerage based in Perth, Western Australia. I know first hand what it is like to move away from family and friends as I have relocated not once, but twice.. the second time with two young children! I love this business as it allows me to help people with their own goals, while balancing my own life as a parent and self-educator. Please get in touch if you need any help buying your home in Australia.
The Legal Bits
Apple Road Pty Ltd (ACN 123 503 293) trades as Mortgages, Money and Me under Australian Credit Licence 384721. This advice is of a general nature only and does not take into consideration your individual needs and circumstances. While every effort has been made to ensure this information is correct we will not accept responsibility for any omissions or errors. Please do not act on this advice without consultation with the relevant professionals!