Planning to buy a house in Victoria and want to know all of the costs involved?
There’s more than just the house deposit and purchase price to budget for, so it’s crucial to research all the potential costs so you know what you can afford. We have a general guide about the hidden costs of buying a property, but this article is purely focused on what to expect when purchasing a property in Victoria.
Let’s start by looking at the upfront costs of buying a home in Victoria.
When we talk about upfront costs, we’re largely referring to items which you must pay, such as government taxes, legal fees, and charges by your home loan provider. In Victoria, these include:
Stamp or land transfer duty is a tax payable to the state for any transaction involving property or land. It’s based on the property value and is calculated on a sliding scale.
For example, for a property worth $825,000, you would pay stamp duty of $44,570 in Victoria.
There' are also stamp duty concessions available for eligible first home buyers in Victoria, including:
For a property worth $825,000, you would pay stamp duty of $44,570 in Victoria.
There is no stamp duty concession for first home buyers purchasing properties worth more than $750,000 in the state.
Most lenders prefer if you have at least 20 per cent of the value of a property as a deposit. This gives them some assurance that you are able to save and are a relatively low risk customer. If you don’t have this size deposit, you are likely to be required to pay lenders mortgage insurance (LMI) to qualify for a loan. This amount is typically rolled into your monthly repayments rather than being payable as a lump sum. However, there are some ways to pay less than a 20% deposit that you may qualify for.
Example: On a property worth $700,000 you will pay $31,780 LMI in Victoria.
Legal fees are largely unavoidable when purchasing a property, given the specialist knowledge required to draw up contracts of sale, review them and process all the necessary documentation.
Solicitor fees for buying a house in Melbourne and Victoria can range from $800 to $2,200, depending on the value of the property and how complex the sale is. Conveyancers are often a little cheaper than using a solicitor. You also need to budget separately for the cost of disbursements, which are additional expenses your legal team can incur in the purchase process, like registering your title and attending settlement.
Solicitor fees for buying a house in Melbourne and Victoria can range from $800 to $2,200.
Before you buy a property you need to make sure it is structurally sound and free of pests, primarily termites. A professional building inspector is qualified to carry out this type of survey of a property, and they will typically produce a report detailing their findings.
Building and pest inspections costs in Melbourne vary depending on the size of the property:
Some lenders charge a mortgage or home loan application fee for processing your application and all the paperwork. Others waive this fee as an incentive to sign up with them. If they don’t expect to pay in the region of $150 for this in Victoria.
Your home loan provider will have the property you want to purchase professionally valued. This is largely so they can accurately calculate the final amount of your home loan. Expect a property valuation in Melbourne, Victoria to cost in the region of $200, depending on the size of the property. Some lenders will combine this charge with the mortgage application fee, so be sure to check.
You are required to register your mortgage against the title of the property. This allows it to be viewed in a title search and identifies you as the owner of the property. Since July 2019 this fee is $119 in Victoria.
In Victoria, you'll need to pay $119 to register your mortgage.
According to Canstar, home and contents insurance in Victoria costs on average $1,433. Viewed separately this consists of $395 (contents) and $1,177 (home) cover, in case your home or possessions are stolen or damaged. This figure is based on a 3 bedroom, freestanding home.
Note that if you live in an apartment under a strata title your building insurance will be covered, so there is no need to take this out yourself.
Let’s now look at all the costs you need to think about
Don’t forget there are all the ongoing bills you need to budget for, including home loan payments, utilities, and if you want to renovate it or if it's in need of repair.
Your monthly home loan payments are likely to be your most significant outgoing, so let’s look at these first. You can use a mortgage repayment calculator to get an idea of how much these will be, based on your home loan amount, the interest rate you are paying, and loan term or length. Based on a home loan of $600,000 paying an interest of 2.42 per cent over 30 years, your monthly repayments would be approximately $2,356 in Victoria.
If your new property needs updating you will have to budget to renovate your new home. This could be relatively affordable, from a few thousand dollars for a cosmetic project, to tens of thousands for a major kitchen or bathroom reno. After moving into your new home you may also notice it needs smaller repair and general maintenance - like painting, fixing fencing, or replacing a few roof tiles. These sorts of jobs are likely to cost no more than a few thousand dollars or less.
Your monthly home loan payments are likely to be your most significant outgoing.
All your utilities can also add up - including your monthly or quarterly electricity, water, and internet connection. Canstar Blue research found the average electricity bill in Victoria to be $1,392, based on average usage in a 4 bedroom family home. They found that the average quarterly water rate in Melbourne is $247, while an NBN connection is in the region of $70 a month for a mid-tier connection.
After reading this you should have a clearer picture of all the costs involved in buying a property in Victoria. You can now itemise all these and work out what property you can realistically afford.
We also have other useful resources to help you on your property journey, including a guide to the hidden costs of buying a house, as well as what to think about if you are upsizing to a larger home or downsizing to a more manageable property.