In this article
- Ten upfront costs when buying a house and the hidden expenses involved when purchasing in Tasmania.
Full disclosure, no one likes to be confronted with unexpected excessive financial costs when purchasing their first (or second) home.
There are many upfront costs when buying a house or investment property; this article reveals the most typical. So, when dreaming of your first home, you can prepare and save for your house deposit and these unexpected costs!
What are the upfront costs when buying a house?
The highest upfront cost when buying a house is the deposit you will need to give the lender in order for your mortgage to be approved so you can purchase the property.
How much you will need to save for a deposit will depend upon these five aspects:
- The total cost of the house sale price and the upfront costs
- Your total income per year
- The particular lender you choose
- If you need and have a guarantor
- Whether you are happy to pay the Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI)
One hidden cost you may not have to pay is Lenders Mortgage Insurance (LMI). You will only need to pay LMI if you have borrowed more than 80% of the property's value.
LMI protects the lender in the instance you (as the borrower) cannot make the repayments on your home loan.
Fall recommends that buyers organise a building inspection or any other relevant inspections when purchasing a home.
A building inspection will give you, as the buyer, peace of mind about the property's structural integrity or provide insight into any renovations or maintenance you might need to undertake after purchasing the property.
Home, building and contents insurance
You will also want to ensure that you have building and contents insurance for the property you purchase before the settlement date. Having the insurance before settlement will ensure that you are covered right from the start in the event of damage to the property.
Stamp duty is a transfer duty charged by the Tasmanian government on property purchases, meaning the transfer of a property title from the seller to the buyer.
In Tasmania, the stamp duty cost is determined by either the purchase price or the property valuation - whichever figure is the most.
For first homebuyers, remember to check whether you are eligible for the First Home Owner Grant, which can assist with paying for stamp duty costs.
Mortgage registration fee
Another upfront cost when buying a house is to register your property to ensure that no one else has a claim on the existing property and that you are now the new owner. You must also pay the discharge fee to sell your property if this is not your first property purchase.
Legal and conveyance fees
You will want to employ a conveyancer or solicitor to assist you with the legal transfer of the property. The cost of legal fees varies; for example, they vary depending on the time they put into working on your case and the number of preparation documents and checks needed.
Connecting gas, electricity and telecommunications
You will need to pay a reconnecting fee to turn your gas, electricity and telecommunications back on once you move into your property.
You will need to consider the costs involved in moving to the new property. However, if you are on a budget and have family and friends to help, you can keep the expense low.
You will want to decide whether you are paying for a removalist or using your friends' and family's trucks, utes and cars.
You can purchase packing supplies such as boxes, tape, labels and bubble wrap, or you can start collecting these items from friends, family and local shops.
With a new property comes new bills! If you have previously rented, you will have some extra costs to consider once you have purchased your own house. If you have previously owned your home, the bills may differ depending on your property's size and location.
Bills you will need to pay:
- Water and sewage
- Council rates
- Garden and home maintenance
On average, the upfront costs when buying a house are estimated to be between 7 and 11% of the total purchase price. Therefore, an $800 000 purchase price could have upfront costs of $60 000+ on top of the required deposit.
Are you struggling to save for your house deposit and all the upfront costs when buying a house? Click here to read our 30 top creative tips to tighten your spending so you can work towards buying your next home faster!
Are you ready to start looking for your first or next home?