Buying a Home or Apartment – What Are the Upfront Costs?

What are the upfront costs of buying a home or apartment?

Buying a Home or apartment can be an exciting time, but it can also be stressful due to the many hidden costs associated with the process. Understanding these costs is crucial to avoid surprises and ensure a smooth transaction.

Conveyancing and Legal Fees

One of the significant upfront costs is conveyancing and legal fees. These fees cover the cost of hiring a solicitor or conveyancer to manage the legal aspects of the property transaction. They ensure that the property is transferred correctly and that all legal requirements are met.

Transfer Fees and Mortgage Insurance

Transfer fees, also known as stamp duty, are another substantial expense. This government tax is calculated based on the property’s purchase price and varies by location. Additionally, if your deposit is less than 20%, you may need to pay for mortgage insurance, which protects the lender in case of default.

Council Rates and Inspections

Council rates are ongoing costs that new homeowners should be aware of. These are local government fees for services like waste collection and infrastructure maintenance. Building and pest inspections are also essential before finalizing a purchase. These inspections can uncover potential issues that could affect the property’s value and safety.

The Role of a Buyer’s Agent

Many first-time buyers are unaware of these hidden costs, which is why working with a buyer’s agent is a smart idea. Buyer’s agents are experts in every aspect of buying a home or investment property. They strictly represent the buyer’s interests in a real estate transaction, unlike listing agents who have a fiduciary duty to home sellers.

Benefits of a Buyer’s Agent

One of the biggest benefits of working with a buyer’s agent is their knowledge of all the upfront and ongoing costs of owning a property. They can provide a detailed breakdown of expected expenses and help you budget accordingly.

Location-Based Costs

Depending on where the home or apartment is located, buyers can expect the final price tag to include a variety of extra upfront costs. These can vary significantly between regions, making it essential to have a knowledgeable agent who understands the local market.

The Upfront Costs Of Buying A Home Or Apartment

Let’s take a look at some of the key factors when considering the upfront costs of buying a home or apartment.

1. Stamp duty When Buying A Home Or Apartment

Stamp duty, also known as transfer duty, is a tax levied on single-property purchases. It is the fee state governments charge to transfer land ownership from one person to another. First-time home buyers often qualify for stamp duty concessions, so they need not worry about this hidden cost.

2. Conveyance and legal fees

Engaging a conveyancer or solicitor to prepare documents for the purchase is not required, but highly recommended. The average cost for these services is between $1,500 and $1,800.

3. Property and pest inspections

Property and pest inspections are not required as part of the buying process but are encouraged. Damage from pests like termites can create expensive headaches later. The cost for both types of inspection averages between $400 and $500.

4. Property valuations

Before you commit to a final purchase price, it is worth considering a property valuation. Real estate valuation experts will collect data and offer an opinion on the value of the property to ensure buyers are not overpaying. A property valuation can cost between $100 and $600.

5. Insurance

Some mortgage lenders will not approve financing without proof of insurance for your new house or apartment. Buyers who purchase property as part of an apartment complex or other conjoined property design may require additional liability insurance. Cost is dependent on the insurance carrier.

6. Financing fees

Buyers who are taking out a home loan can expect a loan application fee. The estimated cost is between $500 and $1,000 depending on the lender and the amount financed. Some lenders may waive the fee upon request.

7. Title transfer 

This is a state/territory government fee for transferring the property title from the seller to the buyer. Fees vary, but you can check for specific details on the websites of the revenue offices in the state/territory where the property is being purchased. 

8. Mortgage insurance

Mortgage insurance is another hidden fee. Buyers without the recommended 20 per cent down payment can expect to be subject to lenders’ mortgage insurance. Fees are calculated on a sliding scale. As a general rule, the smaller your deposit, the more you can expect to pay in mortgage insurance. While it may be a pain, it helps make homeownership possible for everyone. 

Calculating costs Of Buying A Home Or Apartment

These upfront costs can easily tally around 7 per cent of the property price. A property that sells for $450,000 can potentially include $31,000 in additional fees. Using a calculator designed to estimate fees when buying a house can help provide insight into extra costs. Working with a buyer’s agent can help prepare you for the total costs associated so there are no surprises at closing. 

Do you have additional questions about all the hidden costs of buying a home or apartment? Reach out today to speak with one of our buyer’s agents.