Buying a house is one of the biggest financial decisions you will make. Unlike purchasing a piece of goods in the shop, the purchase price that you negotiate when buying a property before exchange is not the final amount. It is important to understand all the costs involved so you can work out your total budget.
Upfront costs
- Stamp Duty
You must pay stamp duty on the purchase price of the property (or valuation in certain circumstances). Duty must be paid within three months of the date of exchanging contracts, unless buying ‘off the plan’ or a house and land package.
| Contract Stamp Duty Scale | |
| Purchase Price | Rate |
| Up to $14,000 | $1.25 per $100 ($10 minimum) |
| $14,001 – $30,000 | $175 plus $1.50 per $100 |
| $30,001 – $80,000 | $415 plus $1.75 per $100 |
| Over $80,000 | $1,290 plus $3.50 per $100 |
| Over $300,000 | $8,990 plus $4.50 per $100 |
| Over $1,000,000 | $40,490 plus $5.50 per $100 |
If you are a first home buyer, you might be eligible for full exemptions or discounts on contract stamp duty under the NSW Government’s duty concession scheme for first home buyers.
- Borrowing costs
- Home Loan Application Fee: This is the fee charged by a bank or other lending body when you apply for a loan. There may be additional costs preparing and registering the mortgage.
- Valuation fee: Your lender usually requires a formal valuation of the property you are buying. This fee may be included in the application fee charged by your lender.
- Mortgage Insurance: Your lender will require you to take out mortgage insurance if you are borrowing more than a set proportion, usually 80% of the property’s valuation. This insurance protects the lender if you default on the loan and the property is sold for less than the outstanding loan amount.
- Home Building Insurance
The insurance will protect you against damage to your property caused by uncontrollable elements such as fire or flood. If you have a mortgage, building insurance is compulsory. There are 2 types of insurance cover:
- Replacement cover: to reinstate your property to its former condition. It means, simply, new for old.
- Indemnity cover: to repair or reinstate your property taking into account depreciation on the dwelling.
- Conveyancing fee
Conveyancing is the process of transferring the property from the seller to the buyer. From 11 October 2021, you are required to engage a solicitor or conveyancer to lodge your conveyancing transaction with NSW LRS electronically. There are no set fees charged for conveyancing.
- Inspection fees
- Building Inspection: A building inspection checks structural conditions, visible defects and necessary repairs.
- Pest Inspection: A pest inspection checks for any signs of past or present pest infestation.
- Strata Inspection: A strata inspection examines and reports on the written records of the owners’ corporation. The report also provide relevant information about strata levies and insurances.
Hidden costs
- Settlement Adjustments
Adjustments refer to the ‘splitting of costs’ between buyers and sellers for certain costs associated with a property. The process ensures that neither the buyer nor seller are paying for costs when they didn’t own the property. For example, if the seller has paid council and water rates for a time when the buyer will own the property, then the buyer reimburses the seller their share by adding it to the purchase price.
- Disbursements
Your solicitor or conveyancer will carry out statutory searches and will charge for these expenses during the conveyancing process.
Ongoing costs
It is advised that you are fully aware of all ongoing costs of buying and owning a property as these costs will affect the money you have available to make your mortgage repayments and pay for everyday expenses. They include:
- Council and Water Rates
- Utilities like water, electricity and gas
- Home Building Insurance
- Strata Levies (if applicable)
- Land Tax (if applicable)
- Maintenance and Repairs.
We recommend you doing your research to estimate the budget required to buy and own a property in order to avoid cost blowout. Unlike many solicitors or conveyancers who charge their conveyancing fee per hour plus variable disbursements for statutory searches, our Property Team will provide you a fixed quote for both our service and disbursements. If you need help with property purchase costs, contact Alliance Compensation & Litigation Lawyers on (02) 8776 3155.
