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Hidden costs of buying a house

July 29, 2022
by
Craig Gibson

Trying to budget all the costs of buying a house?

If you're a first-time buyer, this is an essential step because there are a range of additional, hidden costs beyond the deposit and purchase price that you may not have considered. It’s important to factor all of these into your overall budget, or you could be in for a nasty surprise. 

Here we'll cover all the house purchase costs you need to budget for, including:

  • Government fees and costs.
  • Legal costs and fees.
  • Lender and bank fees when buying a house.
  • Other ongoing and upfront home purchase costs.
  • Additional home buying costs and expenditures to be aware of.

Let’s start by looking at some of the government fees you will have to pay, some of which you may know about, others that might not be on your radar.

Government fees and costs when buying a home

Stamp duty costs on the purchase of a house

Stamp duty—or transfer duty—is a government tax on the purchase of property (and land) based on the value of the home. This is likely to be the largest cost associated with your transaction. Some states offer stamp duty concessions to first home buyers, so you may not have to pay this tax at all. You may also avoid having to pay stamp duty if you buy an ‘off the plan’ apartment.

The variation between states can be quite substantial, so it's important to work out how this will impact you depending on where you live. For example, if you buy a $400,000 home, you could end up paying:

  • Over $16,000 in Victoria or the NT
  • Between $13,000 and $14,000 in NSW, WA or Tasmania
  • Only around $7,200 in QLD

Cost: Use an online stamp duty calculator to work out what you need to budget for, as stamp duty varies by state, and depending on the value of the property.

Registration of title fee

There is a state government charge for registering your mortgage on the title of your property and identifying the property as the security on your home loan.

Cost: The mortgage registration fee varies by state, anywhere from $145 to $190. 

Legal costs and fees when buying a house or unit

Among other things, a solicitor or conveyancer helps you process and lodge all the documents required to complete your property purchase, including the contract of sale, transfer of land document and final settlement process.

Depending on your lender, there may be fees associated with securing a home loan including a registration and application fee.

Your lender or home loan provider—typically a bank or dedicated mortgage provider—have fees associated with their services or product.

Cost: Depending on the complexity of your purchase, you could have to pay anywhere from $800 to $2,500 in legal fees.

Lender and bank fees when buying a house

Lender’s mortgage insurance

If you don’t have a 20 per cent deposit to secure a home loan, most lenders will require you to have lender's mortgage insurance (LMI). This is a one-off cost that covers them in case you default—or can’t pay—your home loan repayments. It's worth saving for a 20 per cent deposit if possible as you will avoid this extra cost. 

Cost: LMI could cost you in the region of $10,000 and varies depending on the lender. 

Lender’s property valuation

Your lender will carry out a valuation of the property you want to purchase to establish its true value. This has a direct bearing on the loan amount they will loan to you.

Cost:  A lender’s property valuation is in the region of $300+.

Loan application or establishment fee

You may have to pay a fee to secure or establish a home loan, though some lenders may simply waive this.

Cost: $600+ if it applies to your loan.

Other ongoing and upfront home purchase costs

Pest and building inspections

Before you buy a property, you will need to make sure it's structurally sound and establish whether there are any visible defects or issues. A professional service can take care of this. You may also do a separate check for critical pests like termites. 

Cost: A building inspection generally costs anywhere from $300 to $700, with a pest inspection costing upwards of $250 depending on the size of the property.

Ongoing loan fees

Your mortgage provider could also charge a fee for administering your loan, which could be an annual or monthly fee. 

Cost: Ongoing home loan fees can range from $5 - $15 a month.

Building and contents insurance

When you move into your new property it is highly recommended you take out building and contents insurance. This is to cover your property and its contents from accidental damage, theft or a natural event like a storm. If you are purchasing a unit the building insurance is covered by the strata corporation, so you only have to insure your belongings. 

Cost: Depending on the value of your property, and your possessions insurance could cost you anywhere from $220 to $1,000 a year. 

Additional home buying costs to be aware of

Buyer’s agent fees and costs

A buyer’s agent can help you locate a suitable property for you, negotiate with the seller and complete background checks on the property. Most buyers don't end up using a buyer's agent, but it's worth considering especially if you have particular requirements or desires when it comes to finding a new home. 

Expect them to charge either a fixed fee based on how much they do for you or a commission calculated as a percentage of the purchase price of the property. 

Cost: Buyer’s agents who charge a commission will work on a range from 1% to 3% of the purchase price, while those who work on a flat rate may charge anywhere from $1,000 to $10,000 for their service. 

Want to hire a reliable buyer's agent? We've identified the best buyer's agents in Sydney, Melbourne, the Gold Coast, and Brisbane.

Moving costs

Once you've purchased a property, moving is the next big step—and it can be a big operation. A professional removalist can do as little as you want, whether it's just moving furniture and boxes, or they can take care of the whole job including packing your possessions. 

Cost: Expect to pay anywhere from $500  to $4,000 for a removalist, depending on the level of service you need and how much you're moving.

Bridging loan costs

A bridging loan is a short-term loan designed to cover the purchase price of a second property while you sell your current property. It can also be used to cover some of the other associated costs with the buying and selling process that are mentioned above.

While they can prove very helpful for bridging the gap when buying and selling at the same time, bridging loans can be expensive and difficult to get approval for.

Cost: Costs vary by lender, while interest charges will be determined by the length of the loan. 

Home improvement costs upon moving in

Your new property may need some TLC after you move in. This could range from minor repairs and maintenance to a full-blown home renovation.

Cost: Depending on the condition of the property, you could spend upwards of $5,000 on cosmetic or functional upgrades. 

Additional costs if you're applying for a construction loan

If you're building a house and making use of a construction loan, there will be fees attached to this. These could include a progress inspection fee (at each stage of the construction process), a settlement fee, a valuation fee, and an admin fee.

Cost: $110 (progress inspection fee), $300 (settlement fee), $220 (valuation fee), and $120 (construction admin fee).

Council rates and strata fees

You are liable for council rates and strata fees from the day of the settlement when the property title is legally transferred to you. 

Cost: Budget for $500 - $800 for council and strata fees.

Note that all of the above-mentioned costs are broad estimates only. Keep in mind that the costs will vary depending on where you're buying your house. For example, the cost of buying a house in Victoria is different from the cost of buying a property in Queensland, and so on. It's important to find out how much each step will cost you based on your personal and financial circumstances as well as your location to ensure you have a clear picture of how much to budget for the full buying process. 

What are the costs of buying a house in each state?

Interested to learn about the typical costs of buying a house in each state? Check out our state-specific cost guides below:

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