Cost of buying a house for the first time

Written by in Buying

A young couple buy their first home and look into the mirror with a camera

We’re all aware of rising house prices and staggering medians – $1.1 million in Sydney for example – but what is the cost of buying a house after the tax office, revenue office, lender, lawyer, and conveyancer have all taken their share? Here’s a roadmap showing you how the list price of your first home is only the beginning of your outlay.

Cost of buying a house: big business means big government

Your state or territory government revenue office will charge stamp duty (just like that on a car, if you’ve ever bought from a private seller). This varies from state to state. Let’s say you have your heart set on a $600,000 house. If you live in NSW, you’re in luck: the State Government has abolished stamp duty for first home buyers on homes worth up to $650,000. For a house worth $700,000, your mortgage registration fee, transfer fee and stamp duty will cost you about $27,267. However, with a $16,500 government concession, this comes to about $10,767. In other states, the totals (without any eligible concessions) are:

VIC: $27,059
QLD: $19,480
WA: $27,732
SA: $37,996
TAS: $27,083

Not only that, but you will have to pay for rates or land tax, depending on your shire or council rules. This may range from $500 to over $1,000.


Paying insurance for your first home…against yourself

If you are getting into the property market without a 20% or higher deposit (which is many of us), you will have to purchase Lender’s Mortgage Insurance, which can add significantly to the cost of buying a house. This is insurance against the borrower (you) defaulting  – which means failing to pay back the loan. Using our example home of $650,00, LMI will come to about $25,025 on a $50,000 deposit (14% of the total value of the home). You can reduce that amount with more of a deposit, or with a guarantor, also known as a co-signer. Beware: if you can’t pay the loan back, your guarantor is also in trouble!

Lawyers, lenders, and fees

Another associated cost of buying a house is a solicitor’s or conveyancer’s fee, which ranges from $300 – 400, and  can include legal database searches to make sure your property has no outstanding claims. Banks will charge a mortgage establishment fee, which can cost at least $500. To save headaches later, it’s worth getting a pre-purchase inspection done to make sure your structure is sound. Depending where you live, this can cost anywhere from $300 to $1,000.

As you can see, the cost of buying a house adds up. Take the time to fully understand all the financial commitments there are before purchasing your first home.

Author: Bill Tsouvalas is CEO and managing director at Savvy, mortgage brokers specialised in first home buyers, refinance and sub prime home loans. He has a been working in the mortgage & asset finance industry for over 10 years. He often writes articles on mortgage, finance, and insurance topics.