The Cost of Buying Real Estate
There are a few costs you will need to prepare for when buying your first home
Preparing for the Costs Ahead
If you have made the decision to purchase your very first home, there are a few costs you will need to prepare for.
These expenses can have an impact on the budget that you set for buying a house, so it's important you determine what they could be before you decide on a property.
Most people know they need to save for the deposit. Deposits are usually at least 5 per cent of the home's overall cost, depending on the type of loan you obtain.
To determine how much your deposit will be, consider:
- The average home price of the area in which you wish to buy
- The type of loan you wish to get
- The amount you wish to borrow through your loan
Stamp duty is a charge that is applied to the sale of residential property by state governments. It is not a fixed cost across the country - it differs in various states.
Stamp duty is one of the biggest costs that you may face in your property purchase, so it's important to figure out how much this will be before you buy a home.
The cost is usually calculated based on the price of the home you purchase but each state has its own system.
The rate often differs depending on several factors:
- Whether you are purchasing vacant land or a brand new house
- If you are a first home buyer
- If you are using the home as your main place of residence.
For example, some states offer first home buyers a stamp duty concession which will make their first home purchase a lot easier.
Depending on your state, this concession could apply to the purchase of new homes only, while other states provide funding for existing dwellings too.
It can be complicated to work out stamp duty on your own as there are many rates that apply to different house prices. Consult an online calculator to help you determine the cost.
There are a number of other costs that are associated with buying your property:
- Establishment fees for your mortgage
- Pre-inspection costs
- Legal fees
- A valuation of the home
While these are not all significant figures individually, they can add up to a sizeable figure. Be sure that you can pay for them as they arise.
Ongoing costs can impact what type of property you choose to buy as well as its location.
Council rates are a form of property tax put in place by state governments across the country and can vary among states and even cities.
They are usually based on the property's value, and the funds are used for local infrastructure and services such as roads, libraries and waste collection.
There will also be expenses for utilities (water, electricity and gas) throughout the time that you own your home. Sometimes there may even be set-up fees for these services when you move into the home.
If you are purchasing in a shared block you will probably need to pay body corporate fees to cover the cost of maintenance on common areas – so make sure you factor these costs in as well.