Buying a house is a significant event in any person’s life. Whether it’s your first or your 10th, there is a lot of time, effort, planning and – of course – costs that go into purchasing a house or any property for that matter.
However, if this is your first time buying a house, there is a lot more to plan for when it comes to costs.
There are obvious costs, such as the agreed price of the house.
However, there are also a number of HIDDEN COSTS that can come as an unpleasant surprise if you’re not prepared for them.
In this article, we’ll run through 12 of the hidden costs of buying and selling a house that you should consider.
The 12 hidden costs of buying a house include:
- Stamp Duty
- Building Inspection
- Pest Inspection
- Transfer/Title Registration Fee
- Loan Application Fee
- Registration of Mortgage Fees
- Lenders Mortgage Insurance
- Council Rates
- Water Rates
- Land Tax
- Owners Corporation Fees/Special Levies
- Professional Fees
Read on for more information about each of these extra costs.
1. Stamp Duty
Stamp duty is a tax that is levied on property transactions in most Australian states and territories.
The amount of stamp duty you’ll need to pay depends on the purchase price of the property and your residency status.
Stamp duty in Victoria is charged on the purchase price or the property’s market value (whichever is greater).
It is calculated on a sliding scale and starts at 1.4% if the property is valued at $25,000 rises to 5.5% if the property is valued at or above $960,000 and rises to $110,000.00 plus 6.5% of the dutiable value in excess of $2,000,000.
Check out the State Revenue Office’s handy online stamp duty calculator.
There are some exceptions that may apply, such as if you’re a first-home buyer or purchasing a newly built home.
2. Building Inspection
A building inspection is carried out to assess the condition of the property you’re planning to purchase.
It’s a good idea to get a building inspection report done by a qualified building inspector before you exchange contracts, so you’re aware of any major structural issues with the property.
The cost of a building inspection report will depend on the size and type of property you’re buying.
Whilst this is an additional cost, it is a highly RECOMMENDED one. You don’t want to buy a property with major defects, after all.
3. Pest Inspection
A pest inspection is carried out to check for evidence of pests, such as termites, in the property you’re planning to purchase.
Like a building inspection, it’s a good idea to get a pest inspection report done before you sign contracts.
The cost of a pest inspection report will depend on the size and type of property you’re buying.
4. Transfer/Title Registration Fee
A transfer fee is charged by the state government when a property is transferred from one owner to another.
The amount of the transfer fee will depend on the value of the property being transferred.
How to calculate the Transfer Registration fee in Victoria from 1 July 2019:
- $86.50 + $2.34 for every whole $1000 portion of the Purchase Price
- Maximum fee is $3,609
5. Loan Application Fee
A loan application fee is charged by some lenders when you apply for a mortgage to finance your property purchase.
This fee can vary depending on the lender, but is typically around $400-$700.
6. Registration of Mortgage Fees
When you take out a mortgage to finance your property purchase, the lender will register their interest in the property with the relevant state government department.
This is done to protect the lender’s interest in the property in case you DEFAULT on your loan repayments.
The registration of mortgage fee is currently $112.40.
7. Lenders Mortgage Insurance
Lenders mortgage insurance (LMI) is insurance that protects the lender in the event that you default on your home loan.
It is required if you’re borrowing more than 80% of the property value and can add several thousand dollars to your home loan costs.
8. Council Rates
Council rates are charged by local councils to help pay for services such as rubbish collection, parks and recreation facilities.
The amount you’ll need to pay will depend on the value and size of your property and the council area in which it is located.
9. Water Rates
Water rates are charged by water utilities to cover the cost of supplying water to homes and businesses.
The amount you’ll need to pay will depend on the levies imposed by the local water authority in the area.
10. Land Tax
If you are purchasing a property from an investor, you may need to cover a portion of their land tax.
This applies even if you are not buying the property as an investor yourself. This is due to a general condition that exists in the vast majority of real estate contracts.
Tick Box Conveyancing has a proud history of helping our clients negotiate this condition out of a contract when acting for the purchaser and recently we saved one client in excess of $14,000 by removing this condition.
The amount of land tax you’ll need to pay will depend on the value of your property.
11. Owners Corporation Fees/Special Levies
If you’re purchasing a unit, townhouse or house in a strata scheme, you’ll need to pay owners corporation fees (also known as strata Levies).
These fees go towards the maintenance and upkeep of common areas, such as gardens and swimming pools.
The amount you’ll need to pay will depend on the size of your property and the services provided by your owners corporation.
You may also be required to cover any extra or special levies that the Owners Corporation has raised on or after the day of sale to cover unexpected maintenance.
It is vital to check the Owners Corporation Certificate and review the latest meeting minutes when purchasing a property affected by an owners corporation.
12. Professional Fees
You may need to engage the services of a lawyer, conveyancer or accountant when buying or selling a property.
The cost of these professional fees will vary depending on the services you require.
So there you have it – 12 hidden costs of buying and selling a house that you should consider.
Depending on the type, size and value of the house you are purchasing the costs listed here could add 10s of thousands of dollars to the cost of your house purchase.
A professional conveyancer – whilst an additional cost – will help you calculate these costs and ensure that you have full visibility of all associated fees and expected outgoings on the property before you sign a contract.
Be sure to factor these extra costs into your budget to avoid any nasty surprises down the track, and contact Tick Box Conveyancing for any assistance you need with pre-purchase advice.
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