Costs Associated with Property Purchase
The biggest chunk of purchasing a house is the money that goes to the seller (vendor). On average in Australia, this is around half a million dollars. But there are other costs to take into account. As a rough guide, you should factor-in an extra 5% above the cost of the actual purchase.
The Cost of Taking Out a Mortgage
When you take out a mortgage with a lender - a bank or an independent financial organisation - you’ll incur a fee for the administration of creating the loan. The amount will depend on the lender but you should be aware of the cost before agreeing to sign with them. Shop around for the best deal. Although getting a good interest rate with a lender is paramount, there may be significant differences in the hidden fees, and these can add up.
There are quite a few useful websites to help you calculate the extra costs involved.
There are three separate costs linked with government fees.
- Stamp Duty
- Government taxes on the taking out of the loan (dependent on the size of the loan)
- Land transfer registration fees which vary from state to state
After the cost of actually buying the house, Stamp Duty is by far the most significant expense you may incur. The amount is calculated on a sliding scale from 1% to 5% depending on the value of the house.
However, there is very good news for the first time buyer of Australian property. In most states, you will be exempt from paying Stamp Duty for homes up to a value of $500,000 or land up to a value of $300,000. Partial exemptions are available for properties of greater value.
Three very good websites offer a wealth of information in a state-by state breakdown of this complex issue:
If you are not able to take advantage of the exemption there are a couple of websites that offer useful calculators so that you can work out the Stamp Duty you will need to pay.
Mortgage Protection Insurance
This is an easily overlooked expense. It’s an insurance policy to protect you, the buyer, and it includes:
- Life insurance cover in the event of your death. This is either a lump sum payout to your surviving spouse, or an agreed monthly payment.
- Disability insurance cover in case you are injured or fall seriously ill. This is similar to life insurance but it is only a percentage of the total amount that would be paid if you died. It is paid out as a lump sum or regular payment in the event you are permanently disabled and can no longer work.
- Involuntary unemployment cover This is paid out if you are unable to work for a period or forced to stop working permanently.
Mortgage Protection Insurance is usually compulsory, especially if your mortgage is for more than 80% of the property price.
Property Insurance (Building Insurance)
Property Insurance, or Building Insurance, is another compulsory expense imposed by the lender. It’s there to protect you if your house is damaged or destroyed. The cost of this will depend on the value of the house and will also vary according to where the house is located. Obviously, if your home is in an area vulnerable to natural disasters, your property insurance premium will be higher than the average.
It is likely your first home in Australia will be a rented one. When it comes time for you to move into your newly-purchased home you’ll need to transport your furniture and belongings. The cost of removals depends upon the amount of furniture and personal effects you have as well the distance between the rental home and your new house. The overall cost will also depend on how much you do towards the move. If you want a complete service where the removals firm pack everything for you, transport it and unpack at the other end, it will obviously be considerably more expensive than if you do the packing and/or unpacking yourselves.
There are many different removals firms (removalists) in Australia. Moving house can be an expensive process and it’s a good idea to get at least two quotes before committing to a particular company.
A Google search will bring up many different firms, but it is a good idea to go by personal recommendation if you can.
Legal Fees - Settlement Agents/Solicitors
You have to use either a qualified and registered solicitor or a settlement agent (sometimes known as a conveyancer) to manage the legal aspects of buying your home.
Upon Completion, the agent/solicitor also supervises the transfer of monies. They act like a conduit. The money from the lender and the deposit from you goes to the agent. They then use this money to cover the purchase price and pay all the fees relating to the loan - Stamp Duty (if necessary), government taxes and other miscellaneous expenses.
For most property purchases, the settlement agent or solicitor will probably charge about $1,000.
Inspection and Survey Fees
The main purpose of a survey or an inspection is to test that the timber structure of a property is sound and to test for pests. A particular danger in Australia comes from termites or white ants. For some lenders in some states, a termite inspection is mandatory. A quick Google search will provide a range of companies who offer survey and inspection services. See article: Relocating to Australia. Inspections and Surveys
In 2000, the Australian government introduced a measure to stimulate the property market entitling first time home owners to apply for a grant of up to $7,000 towards the cost of the purchase of their home. This is called the First Time Owner Grant (FTOG).
There are a number of rules and conditions linked with the grant. Most importantly, only permanent residents and Australian citizens are eligible for any grants or concessions from the government.
You can check your availability at the Australian government website for First Home Buyers. This will direct you to the state in which you live and give you detailed information on the availability of grants there.
Visit our Life in Australia section for more articles related to the subject Moving to Australia.