7 hidden costs of buying a property

There is more to buying a new home than just the price tag.

With many Australians unaware that the deposit saved is only part of the cost of buying a new home, it’s easy for a seemingly affordable property to suddenly go out of your range when the fees stack up.

The deposit saved for a home loan will be one of the biggest initial outlay for a new homeowner, but Australians should also allow approximately 5 per cent for additional costs associated with buying a property.

So what are these hidden costs?

Lenders mortgage insurance

Lenders mortgage insurance (LMI) is one way of getting into homeownership without having the 20 per cent deposit usually required by mortgage providers, but it comes at a cost.

The final cost of LMI depends on the insurer, the amount of the loan and level of risk.

But as a guideline, a first-home buyer in NSW looking to buy a $600,000 home with a 10 per cent deposit can expect to pay an LMI of around $12,000 according to Sydney-based provider, Genworth.

Stamp duty

Stamp duty is government fee which varies depending on the location and price of the property.

At a fee of around $13,000 for a $600,000 home, stamp duty can significantly affect the cost of a property.

Mortgage application fee

Even applying for a mortgage comes with an additional hidden cost, with some banks or other mortgage providers charging up to $1000 for the application.

Legal fees

The fee for a conveyancer or legal professional to prepare the paperwork for buying a property can stack up to $2,500 alone.

Inspection fees

Looks can be deceiving so in order to avoid extra costs in the future, inspections are essential, but the costs can stack up quickly.

A building inspection can cost up to $700 while pest and strata inspections can cost up to $350 each – a potential total $1,400 in unexpected fees.

Registration fees

Whenever a property changes hands, a land transfer document needs to be registered to notify to change of ownership and there is also a government fee to register mortgage documents.

Combined, these can add up to around $330.

Valuation fee

A property valuation is when a qualified valuer assesses certain aspects of a property to determine a likely list price for it.

Property valuations from banks usually charge $100-$200 and independent valuers usually charge upwards of $400.

Some lenders waive the price of a property valuation which can save you a significant amount of money when considering a home loan.