The Real Cost of Buying a Home

**What are the costs involved with buying a home?**

Entering the property market requires a clear understanding of upfront and ongoing costs before signing a contract. Identifying these expenses early ensures adequate funds are available at settlement and provides sufficient time to prepare.

**Deposit on your mortgage**

The primary requirement is establishing a deposit and savings. Savings and deposit requirements differ, ranging from 2% to 20% or higher depending on the lender. Reviewing lender options helps set a clear plan to meet savings goals.

While borrowers could once secure nearly 100% financing using a first home owner grant as a deposit, lenders now require a demonstrated amount of genuine savings.

**Stamp duty**

First home buyers may qualify for exemptions or concessions, though property value thresholds apply. Current rates can be verified via state revenue offices or official resources such as firsthome.gov.au.

Upfront costs on a second property purchase are frequently overlooked by buyers who received exemptions previously. A mortgage broker or conveyancer can obtain an accurate estimate for this expense.

**Lenders mortgage insurance**

Most lenders require lenders mortgage insurance (LMI) for loan-to-value ratios above 80%, though some specialised applications require it below that threshold. LMI premiums are calculated as a percentage of the loan and scale upward significantly above 80%. Contributing a larger deposit reduces this cost.

Some lenders offer products above 80% without LMI. These lenders may charge higher rates or fees, but can accommodate applications outside standard insurer guidelines. Certain professions, such as medical practitioners, may also access LMI waivers up to 90% LVR.

**Borrowing costs**

Lenders may charge application, valuation, or settlement fees. Major banks often keep these fees minimal or waive them, whereas some low-rate lenders require borrowers to pay valuation and application costs directly. Evaluating the lifetime cost of a loan is useful, as paying $500 to $1,000 upfront may be offset by a lower interest rate over 30 years.

**Pest and building inspections**

Pest and building inspections help buyers identify maintenance issues or termite infestations prior to purchase. Combined inspection costs generally range from $400 to $800 depending on property location and inspector.

**Conveyancing**

A conveyancer or settlement agent oversees title searches, property transfers, and legal requirements to ensure settlement proceeds smoothly. They also assist if contract disputes arise or special conditions are required. Fees typically range from $800 to $1,500 depending on the scope of work.

**Insurance**

Lenders usually require proof of building insurance prior to settlement. Comparing quotes and verifying coverage for property-specific risks, such as flood damage, ensures appropriate protection.

**Essential services**

Connecting phone, internet, electricity, and gas services in a new home often incurs connection fees, requiring post-settlement funds to cover initial setup costs.

**Contingency funds**

Property maintenance issues, such as failing hot water systems or plumbing leaks, can arise unexpectedly. Maintaining an emergency reserve, such as through a home loan redraw facility, keeps extra funds accessible while lowering home loan interest charges.

Understanding property purchase costs in advance ensures buyers are fully prepared for settlement.