Buying a house: The upfront costs

There’s no way around it – getting your deposit together is tough work. Then, once you’ve finally saved enough, you’re hit with an array of other upfront costs. Here are 10 costs you need to factor in (apart from your deposit).

Give me the main points

• Stamp duty can add 4% to the purchase price.
• First homebuyers qualify for exemptions – though these vary by state and territory.
• You’ll need to budget for mortgage application fees.
• Banks will levy other set-up fees. Ask for a package deal.
• Get good legal and conveyance people. Cheaper isn’t always best.
• Try to save your 20% deposit (and avoid Lenders Mortgage Insurance).
• Inspection fees add up – but it’s a mistake to skimp on them.
• These upfront costs can get you down. A good financial advisor can help heaps.

Stamp duty

Outside the deposit, this’ll be your biggest upfront cost. Stamp duty varies greatly from state to territory to state—and the rules (and exemptions) can seem complicated.

Check out the government websites of your state or territory. But be warned: the various schemes change almost yearly so you’ll need to check and double check.

As of October 2014, if you’re a first homebuyer buying a $400,000 home, your stamp duty will range from nothing (Queensland and West Australia) to approximately $16,330 in South Australia. But many first homebuyers qualify for grants and exemptions.

Transfer fee

This is a fee levied by the state governments to cover the cost of transferring the title. Again, there’s a huge disparity between states and territories. In the Northern Territory, for instance, the transfer fee is just $137 (on a $400,000 home). In South Australia, it’s $2901.

Mortgage registration fee

Another one of those state/territory fees, though thankfully it's not a biggie. On that $400,000 house, the cost ranges between $107 (NSW) and $189 (Northern Territory).

Legal/conveyance fees

These fees are for a licensed conveyancer to review your contract, perform checks on the title, and draft the settlement documents. They basically do the paperwork. Depending on complexity, it’ll cost between $700-$2500. Learn more at the Australian Institute of Conveyancers’ website.

Mortgage application fees

These are the fees your bank charges to set up your mortgage. Most banks charge additional fees (mortgage registration, loan service fee etc.) so ask them to itemise everything. And also ask if they offer reduced-fee deals or packages.

Lenders Mortgage Insurance

If you get a 20% deposit together, you usually won’t need Lenders Mortgage Insurance. But homebuyers with a smaller deposit will. This is a one-off fee equivalent to between 1-3% of your loan amount.

Inspection fees

A thorough building inspection is essential. You might be tempted to skip a pest inspection, but the average termite colony costs $7000 to remove.

Home, building and contents insurance

If you have a mortgage, building insurance is compulsory. Premiums vary sharply by state/territory, but budget around $1000 a year for home insurance (on a $400,000 house), and an average of $500 for contents.

Moving charges

These can vary massively depending on how much stuff you have, and how far you’re moving. But A Guide to the Cost of Home Purchase (PDF, 304kb) estimates between $550-$3500.

Connecting gas, electricity and telecommunications

Try and negotiate with the vendor so the power stays on (and you’re not hit with reconnection fees).

How much all up?

Your Mortgage website estimates upfront costs to be between 7-11% of the purchase price. On a $400,000 home, that’s $30,000-plus on top of the deposit.

Pretty daunting for first homebuyers, but remember the First Home Owner Grant may assist with stamp duty costs.