If you are buying your first home in New South Wales it must be exciting! But maybe also a bit overwhelming? Apart from saving a deposit there are several hidden costs in a property purchase which can pop up unexpectedly and hit your hip pocket.
If you are buying your first home in New South Wales it must be exciting! But maybe also a bit overwhelming? Apart from saving a deposit there are several hidden costs in a property purchase which can pop up unexpectedly and hit your hip pocket..
Considering these costs can protect you from unpleasant surprises later on so if you want to avoid a bumpy road ride towards buying your first property in NSW, this article can help you understand five hidden costs you must know about. Let’s explore the details.
1. Stamp Duty (Transfer Duty)
It is a government tax and depends on the property’s sale price. In NSW, for homes under $800,000, stamp duty is exempt for first home buyers and a discount applies for first home buyers for properties in NSW between $800,000 and under $1M, you can apply for a discounted stamp duty rate.
Stamp duty is calculated on the agreed sale price or the market value. E.g. a property worth $900,000 will attract a stamp duty of approximately $35,000.
If you are planning to buy a new property, you can opt for the First Home Buyer Grant. Use the NSW Revenue Calculator to understand how much stamp duty you may have to pay exactly.
2. Conveyancing & Legal Fees
Conveyancing fees cover the legal side of buying a property. Find a licensed conveyancer or solicitor to help you with:
- Review the contract of sale
- Conduct title and property searches
- Manage settlement and legal paperwork
A few conveyancers offer free contract reviews to help with your property search. Typically, the fee falls in the range of $1,200 to $3,500 depending on the complexity of the purchase. There may also be additional expenses such as title searches.
A conveyancer ensures everything is done appropriately within the legal framework to protect your rights and having someone to review the contract also allows you to spot contract clauses that might cost you later on and negotiate contract clauses with the seller’s solicitor.
3. Building & Pest Inspections
It’s crucial to inspect the property’s condition before the purchase. These inspections help you discover structural damage, leaks or termites which can cost you..
- You may have to shell out $400 and $1,000 to get this done. It depends on the size and type of property.
- You might have to spend money on these; however, it can save you thousands in the future.
- Any issues inspected give you a scope to negotiate with the seller for repairs or a reduction in the property price if anything major show up.
4. Lenders’ Mortgage Insurance (LMI)
LMI is a fee that protects the lender, if you default on your loan, not you unfortunately. It’s usually required if your deposit is less than 20% of its value.
Here’s how it affects you:
- For a $700,000 loan with a 10% deposit, LMI could cost over $15,000 .
- It’s added to your loan amount and accrues interest over time.
How to avoid or reduce LMI:
- Save a 20% deposit.
- The First Home Guarantee allow eligible buyers to purchase with just 5% deposit without paying LMI.
Talk to your lender or broker about your options. LMI can be a significant cost, but it’s avoidable with the right strategy.
5. Ongoing Costs After Purchase
Here are some ongoing costs to understand that you will have after purchasing the property:
- Council Rates: You need to pay the Council rates, which is a local government tax. How much you pay depends on the Council area and the land value. For example, in the Liverpool Council, if your land is valued at $700,000 (not house and land), you will be required to pay Council rates of around $525 per quarter
- Strata fees : If your property is a unit or townhouse, you have to pay for shared insurance for the apartment building and all facilities on the property, such as lifts, pools and gardens. It costs you anywhere between 500 to $5,000 + per year . It will be wise to ask the agent for the annual strata fee before making an offer.
Because the strata fees should include building insurance, it means you won’t need to buy a separate home insurance policy but may still want to consider contents insurance.
Home Insurance
This is crucial to protect from unseen future events such as fire, storms and other risks. Choosing contents insurance is preferable if you have anything of value, though this is optional. In 2023-24, the average premium stood at about $1,946.
Moving Costs & Utilities
It depends on how much stuff you own. Local moves can cost between $300 and $3,500 . Free if you have help from family and friends!
Other Costs to Watch
- Mortgage registration fee : $160 to $230
- Unexpected repairs : Despite careful inspection before property purchase, you might notice some damage, which you may have to repair. It’s wise to be ready for that.
- It is amazing how often a hot water service breaks right after you move in!
Conclusion
Buying a home is more than just paying the deposit. From stamp duty to conveyancing fees , inspections, insurance, and ongoing costs, it’s essential to plan for all costs involved. These hidden costs of a property purchase are unavoidable. But with good planning, you can stay in control.
FAQs
What is stamp duty and how much will it cost?
Stamp duty is a tax paid to the government when you buy a property. The cost depends on property value. For homes under $800,000, stamp duty is exempt for first-time buyers in New South Wales.
Do I need building and pest inspections?
Yes, unless you know what you are doing. They help you discover hidden issues/damages and assist in repairing the damages through the seller or negotiating the price accordingly.
When should I hire a conveyancer?
As soon as you decide to buy a property. A conveyancer guides you through all the legal processes and protects your rights.