5 up-front costs you should know about when buying your first home
Updated: May 25, 2022
Becoming a first home owner is one of the most memorable times in any person's life! It's about taking that next step in providing yourself with security and setting yourself up for life. At REIF, we've all been first home buyers at one stage and although exciting it's sometimes daunting when you're unaware of the upfront costs that you need to consider when committing to a valuable asset, such as a house.
Although there are many upfront costs to consider when buying your first home, we're sharing our top five most important costs that you should be aware of. From stamp duty, LMI, legal fees, council rates, and building and pest inspection, we will cover off on these five important costs. We will also explain what they are and what they mean when your entering the property market for the first time. It's important to be educated on such a massive commitment, that is purchasing your first home.
Stamp duty is a government tax you pay when you're purchasing your first home. As a first home owner you may be eligible for savings and concessions towards this tax. Though, this is dependent on where you're purchasing your property within Australia. As it's governed by State and Territory Government's, the value of this tax and it's concessions for first home owners can differ.
Below, we have detailed the concessional savings that you may be eligible for as a first home owner in the States of Queensland, New South Wales and Victoria. However, if you're purchasing your first home in another State or Territory, please refer to their website for more information on stamp duty.
In Queensland, you don't need to pay stamp duty as a first home buyer if your house is valued under $500,000. However, concessional savings are applied if it's valued between $500,000 to $550,000.
As a first home owner in New South Wales, you don't need to pay stamp duty when the property is valued below $600,000. Concessional savings are applied to the purchase of a new home when it's valued between $600,000 and $700,000.
When you're in the market to buy your first home in Victoria, you pay zero stamp duty when the purchase price of your property is valued below $650,000. For properties between $650,000 to $800,000, concessional savings are applied.
Lenders Mortgage Insurance, often abbreviated to LMI is a once-off, non-refundable insurance policy that some home loan borrowers will need to pay for. It helps protect the banks from any financial loss if the borrower cannot afford to meet their home loan repayments. Lenders will require you to pay LMI if your home loan deposit is less than 20% of the total value of the property you are planning to purchase.
LMI is calculated as a percentage of the loan amount. It varies depending on your Loan-to-Value Ratio (LVR) and how much you're borrowing. If you're in the market for your first home and wish to determine how much LMI you will be required to pay, reach out to our team today for a free consultation with one of our mortgage brokers. They will be able to assist you with working out these calculations and your borrowing capacity.
When you're buying a huge asset such as your first home, you need to be aware of conveyancing and legal fees. Although, technically, you can complete the legal aspects of buying a property yourself, it's highly recommended that you engage the services of a solicitor to prepare your documents and provide you with expert legal advice. The legal fees involved when buying a home are generally around $1,800.
Building and pest inspections
When buying a home, if you're a a first home owner, it's important to be aware of the cost of building and pest inspections. For a small fee (usually around $600) these inspections ensure that you're property is checked for pest and damages. This inspection will give you peace of mind as a new property owner in knowing that you're home is safe and ready to move in.
Although this rate is technically on-going, it should also be considered in up front costs, especially if you're building a new home. Property owners are liable to pay council rates and charges that cover the costs of rubbish collections, maintenance to local government sites such as parks, as well as water and sewerage services. If you're building a home, you become responsible for these charges as soon as you settle on your land.
Want to learn more?
Although there are plenty more up-front and on-going costs that you should consider as a first home owner, these are our top five. If you're interested in learning about the other costs that are involved, please reach out to our team today. We will be able to assist you with these enquiries. Furthermore, if you're in the market to build your very first home, we would love to be able to assist you. With access to over 10,000 properties, nation wide, we will be sure to find the most suitable one for you. Our contact details are provided below.
Ph: 1300 130 932
We explore this topic on our eBook 'Guide To Buying Your First Home.' You can check it out here for free!