The true costs of buying a home

When I bought my first property, I didn’t have a huge deposit. In fact, I had less than 5%, so I could only just afford the property and definitely couldn’t afford any expected costs.

If you’ve been paying attention so far, you know that overextending yourself is a bad idea, and I almost got caught out.

Here are some additional costs that you need to consider when buying your home.

In my case, I got to settlement assuming that the bank was happy to charge me just a fat interest rate and no other fees, but that just wasn’t the case.  I had to scramble to find an extra $1.2k on the settlement to cover my bank and settlement fees which was money I just simply didn’t have. In the end, I had to stick it on my credit card.

But could have been all avoided if I had factored it in upfront.

It might seem illogical, but some lenders may charge you a fee for the privilege of applying for a loan. Banks have to pay processors and lawyers to do the loan. Even for so-called “fee-free” loans, there are sometimes settlement and documentation fees.

The application fees are generally around $500-$600, though they can be more than $1000 depending on the loan and lender.

Borrowing fees can include:

How much you would need to contribute to a $300,000 property purchase without the first home owners’ grant in Brisbane, including a few minor bank fees.

Fortunately, it is super easy to manage these fees, and in most cases, you can get them waived.  Talk to your broker and make sure they take you through all the upfront borrowing costs to ensure your budget works. With our clients at Hunter Galloway, nine times out of ten we get the annual fee waived.

Government fees are one of the secret stings. They’re different to stamp duty, which I’ll cover in a minute.

Government fees when buying a home in Queensland include:

You’ll pay for the privilege of formally registering your mortgage, while the cost of transferring the property into your ownership will also fall to you, as the new owner.

Registration of transfer fee is the biggest sting.

For example, if you’re a first home buyer paying $0 duty on a $400k new home in Queensland, you’ll still pay about $1,270 to register the transfer.

Think of registration fees as just another government charge when buying a home. Unlike bank fees, there isn’t any way around these and no discounts to be had.

Just be aware of them, and make sure your broker factors them in upfront because it can be another few hundred to a thousand dollars that you didn’t know you needed!

This is one of the few non-optional upfront costs for buying a house.

Stamp duty on property purchase is a state government tax. As such, the amount that is payable will vary from state to state. The dollar amount payable also depends on the value of your property, but it can be thousands or tens of thousands of dollars.

The good news is that first home buyers get some relief, provided you are living in the property.

On a $500,000 house, first home buyers will pay nothing in Queensland and for those buying their second or third home, you can expect to pay around $8750 on a Brisbane home of the same price.

For example, see below or refer to the Queensland Office of State Revenue website.

The more expensive the home, the more you’ll pay. At general rates, duty on a $1m purchase is $38,025.

Councils need to charge rates to raise revenue so they can provide services and infrastructure to their communities.

Each year, as part of the budget process, councils  decide the rates and charges for the financial year. The level of rates that landowners must pay is at the sole discretion of their council.

The person selling the property will have paid any rates owing to the council, generally to the end of the quarter.

You may need to pay the person the remaining yearly/quarterly rates. For example, if you are settling in June, but the previous owner has paid until July, you need to pay them for that one month, and this is payable on settlement.

This is another cost that isn’t negotiable, but worth being aware of to budget into the costs of owning your home.

The rate increases per year will depend on where you live.

Check the current rates notice for the property you’re buying.

If you are buying a stand-alone house, you won’t need to pay strata fees. But if you are buying a unit, apartment or townhouse in a complex you will need to pay strata fees.

Strata fees, also called levies, are contributions generally paid quarterly into the strata (or body corporate) bank account. These fees are used to fund the ongoing expenses of your building complex, such as cleaning, gardening, electricity, building maintenance, and plumbing.

Knowing the strata fees is critically important because once you buy the place, you are responsible to make these contributions every three months until you sell the place.

If you are buying a home in a complex, you need to get a copy of the strata reports.  This can save you big bucks.

When I was buying my first home, I almost didn’t bother getting the strata report. I didn’t want to pay. Luckily I sucked it up and spent the money.

If I hadn’t paid for the strata report, I would have been up for $9,000 in special levies in the first year of owning my property.

Yeah, it would have cost me over $9,000

I was buying into a building that had massive water leaking issues, and serious concrete cancer: all stuff that you couldn’t see from the outside or in a building and pest report.

But the strata report detailed this, and also went on to explain that the strata was needing to raise additional contributions from the unit owners.

Needless to say, I moved on to a different property and avoided the financial heart attack.

Your lawyer can arrange a strata report. In some states you need to pay for these and in others you can request a copy from the body corporate manager. Either way, it’s worth the effort. If the strata fees are really high, or they are getting raised up, you can bet your bottom dollar they will be coming out of your pocket. Best be prepared.

A lot of buyers think that they don’t need home and contents insurance, but it’s vitally important. Home and contents insurance will protect your house if there is fire, theft, flood, or accidental damage. We’ll cover this in more detail in our SETTLE section. For now, just be aware that you will need home and contents insurance before settlement is complete.

The good news is you can go online to source or arrange to speak with your mortgage broker. At Hunter Galloway we work with Allianz and can help arrange home and contents insurance for you—Allianz gives our clients 90 days free cover until settlement.

You’ll need to pay a legal professional or conveyancer to conduct title searches, make a strata report (if you’re buying a townhouse or a unit), review the contract of sale and arrange settlement details.

Even a standard Queensland contract can have special conditions or deadlines that change what you’re agreeing to, so I’d get it checked before you sign.

If you are buying at auction you need to engage a solicitor or conveyancer before you bid.

If you’re buying by private treaty, get the contract checked before you sign too, rather than relying on the cooling-off period.

In general, conveyancers charge a flat fee, while solicitors commonly charge by the hour, with the amount paid depending on how complex your purchase is.

A few tips we give our Hunter Galloway clients on legal costs are:

Approximate cost is $1000 to $2000, depending on the searches conducted. 

Building and pest reports are what I would consider the most common, and almost mandatory cost when buying a house. These reports look at the building (structural soundness) and pests, to check you aren’t flatting with termites or white ants. A typical building inspection for a 4-bedroom home can cost $400 to $500 and pest inspection $200 to $300. The good news is, you can save a few hundred dollars by getting a combined building and pest report for around $500 to $600.

You’ll learn more about building and pest reports in the SEARCH section. For now, just be aware of the cost and factor this into your budgeting process.

Moving costs might seem like an obvious one, but have you budgeted for it?

Okay, wise guy, if you have, then have you also factored in connection costs?

Depending on how far you are moving (and how much stuff you have to move) removalist fees can also add a few thousand dollars to your upfront costs when buying a home.

For a local move (i.e. within the same city), Home Improvement Pages recommends you set aside anywhere from $300 to $3500. For an interstate move, removalist costs can be several thousand dollars more than this.

Backloading is great for moving interstate; I used it when moving from Sydney to Brisbane and it was under $1000 to move a bunch of stuff.

The downside of backloading is it takes ages for your stuff to arrive.

One thing you probably didn’t know is when moving into an apartment you need to organise with the building manager beforehand to book out lift/elevators, and be aware of where you can and can’t park. 

Another good news story is on connection costs.

With the increase in competition in the energy market in Brisbane, I have found you can get any connection costs waived provided you sign up for a 12-month contract. Phone around and see what you can do, but companies like Origin make this pretty easy when moving into a new home.

Let’s go through an example to show exactly what it would cost to buy a first home in Brisbane. This is a house that Nathan (one of our customers) was looking at buying when he came to us for help with his home loan.

Nathan isn’t a first home buyer, so he only gets a partial stamp duty concession on his home purchase and finds the perfect unit on Margaret Street in Brisbane for $555,000. He has around $75,000 in savings, so a little bit over 10%.

In this example, Nathan is wanting to capitalise or add the lenders mortgage insurance to the loan amount so he doesn’t need to pay this upfront.

Table of Costs of Buying a $555,000 House in Brisbane

The total deposit amount required is the total costs, plus his 10% deposit. 

In this example, while Nathan paid a 10% deposit, or $55,500, once you factor in the stamp duty and other costs his deposit is actually closer to 13%.

A simple rule: You will typically need to budget around 3% of the purchase price of your house for additional costs in the buying process.

Read more: 16 costs to budget for when buying a home in Brisbane