Notes 21-10
The Cost Of Buying

Turns out homework didn’t stop when you left school! Buying property requires a huge amount of planning, research and budgeting, especially if it’s your first home. Generally, you must have at least 5% of the property value to put down as a deposit. Remember, however, that there are additional costs on top of the purchase price that you will need to consider in the grand scheme of things. You can use our online calculators to give you an idea of costs.

What additional costs are there?

• Stamp Duty

What is stamp duty?
Stamp Duty is one of the biggest upfront costs involved in buying a property. This is an external cost levied by the government payable by the purchaser of real estate, and will not be included in the lender’s comparison rate.

How is stamp duty calculated and do I have to pay it?
It can be difficult when working out the amount of Stamp Duty you need to pay, as it is dependent on the value of the property you intend to buy – the higher the value of the property, the more duty to be paid. The amount payable is also dependent on the state in which you are buying property in. This is because Stamp Duty is revenue levied by the government and varies between states. Some people, including first time buyers, are eligible for exemption or a rebate. You can use our Stamp Duty calculator and find out about your state’s policy on Stamp Duty.

• Lenders Mortgage Insurance

Lenders Mortgage Insurance (LMI) is insurance that the lender takes to protect itself against a borrower defaulting with a small deposit. Generally when you borrow above 80/85% Loan to Value Ratio (LVR) you will need to pay LMI. LMI allows you to borrow up to 95% of the purchase price of your home. With LMI you can start purchasing your property sooner with a smaller deposit. This means if you are purchasing a property and are placing less than a 20% deposit down, generally you will need to pay LMI. A couple of lenders allow for a 15% deposit with no LMI but their criterion for lending is stricter.

• Conveyancing

Conveyancing is highly recommended when making a big purchase – and what bigger purchase than your home will you make in your life? It is hugely beneficial to use the expert service of a solicitor or conveyancer to complete the change-of-ownership documentation involved in purchasing property to ensure that everything runs smoothly for you.

• Are there any other costs I need to account for?
It may sound silly now, but remember that you need to account for the cost of moving your belongings. Be sure to hunt around for the best deal, getting quotes from a few different removal companies. You will also need to organise insurance for your new home. Also remember to set aside money for your first weekly food shop and any urgent maintenance that your new home may require.