The Costs Involved

Buying a home involves a range of upfront costs that you will need to factor into your budget

Stamp duty

Stamp duty is a state government charge that may be payable on the purchase price of your home and on the value of your mortgage. The amount payable varies depending state and territory. Below is the Victorian State Revenue Office website or use the Mortgage Gallery calculators or see the table in the centre page.

www.sro.vic.gov.au

While stamp duty can be a significant upfront expense, valuable concessions are available for first home buyers

Lenders Mortgage Insurance (applies to deposits less than 20%)

If you borrow more than 80% of the value of the property that you are buying you will need to pay Lenders Mortgage Insurance (LMI). This insures the lender (not you, the borrower) against non repayment or default. By protecting your lender against default, LMI allows you to borrow with lower deposits. Your lender will organise LMI on your behalf, so it’s not something you need to shop around for.

The LMI premium you can expect to pay will be based on the size of your mortgage and the purchase price. One of the best ways to reduce the cost of LMI is to save a larger deposit. However, this is not always possible, and to make the premiums more manageable some lenders will let you add the LMI premium to the home loan. This is called ‘capitalising’ the expense, and it lets you pay the LMI bill gradually rather than adding it to other upfront expenses.

Other costs

Purchasing a property involves other associated costs that are listed below, these can add up to around 5% of your home’s value. Aim to get several quotes for services like insurance and furniture removal to ensure you get the best deal. And don’t forget to set funds aside for the house warming.

Loan costs

Loan application fee

Valuation and lenders legal fees

Conveyancing fees

Inspection costs

Building inspection

Pest inspection

Insurance

Property insurance

Contents insurance

Moving in costs

Council and water rates

Utilities connections

Mail redirection

Furniture removal