A property purchaser’s budget tool
What expenses should I budget for when buying my property?
If you’ve done a bit of research into buying a property already, you probably have a good idea at least of “The Biggies” – the major costs you’ll incur in addition to the cost of the property you are buying. But as with many big purchases, and probably none more so than buying a property, there are usually at least a few additional charges that add to the overall cost that might tip the scales on affordability or mean you’ll need to borrow or save more money than you thought.
If your budget is tight, or if it’s been a while since you last purchased property, then you’re going to want to know what other costs you’re going to need to pay when you buy a property in addition to the purchase price. Below is a table of expenses you need to be aware of, and potentially budget for, before exchanging contracts.
I do caution that every property is different, and costs will depend a lot on the area you are buying in, what type of property you are buying, what the condition of the property is in, your financial position, and any other special factors that may be present. The costs indicated in the table below might be less than the costs you end up paying, so it is sensible to give yourself a buffer for unexpected costs when factoring in all expected, standard charges.
I encourage you to engage with your broker or mortgagee in advance of beginning your property search in earnest. They can advise on what amount you should be able to borrow, whether any transferee duty exemptions or concessions are available to you as well as whether you’ll need to pay mortgage insurance.
PLEASE NOTE that items marked with a * are not usual or standard in every purchase and may or may not apply to your purchase. Your conveyancer or solicitor can assist you with determining these charges, but only once they are engaged.
Costs associated with the purchase of a property
Purchase price
Per negotiation with the vendor. Cost is variable.
Adjustments on the purchase price
These costs are added to the final purchase price at settlement. You’ll pay your fair share of council rates, water rates, levies, etc in proportion to your period of ownership or occupation in the billing period in which you settle. The vendor will pay the balance.
Typical adjustments include:
Council rates
Adjusted annually, bi-annually or per quarter.
Water rates
Adjusted per quarter.
Levies
Adjusted bi-annually or per quarter. Only applicable to strata and community title.
Other adjustments may be payable
Examples are Land Tax and occupation rent, but there may be others.
Conveyancing costs and usual disbursements
Expect $1,800.00 – $2,500.00 for most regional properties. Higher value properties and off-plan purchases may attract higher costs owing to added complexity. Anything less, and you should be questioning the competence of the advice you receive. Bad advice has hidden costs.
*Pest and Building Report
Expect to pay about $500.00+
The estate agent can probably recommend a building inspector. Not usually required for Strata.
*Strata Report
For Strata only. Speak to your solicitor or conveyancer.
Expect to pay about $400.00+
*Survey, building certificate, and other searches and reports
Not compulsory but if recommended by your solicitor or conveyancer you should consider the risk to you if you do not follow that advice and spend that bit extra on due diligence. Some properties have higher risks than others, and, depending on these risks, your solicitor or conveyancer may recommend particular, additional searches or reports to you.
Variable costs. Speak to your solicitor and/or conveyancer or obtain quotes from surveyors.
*Title Insurance
Not compulsory but recommended for all properties and particularly where you do not have the time to conduct full due diligence on the property you are purchasing. This variable one-off cost is charged on a sliding scale and is dependent on any special risks. Speak to your solicitor or conveyancer.
*Deposit Bond costs
A Deposit Bond may need to be obtained where you do not have sufficient free cash to put down the required deposit on exchange of contracts, but you have equity elsewhere.
Speak to your broker or mortgagee. Costs for obtaining a deposit bond are charged on a sliding scale depending on the property price/value.
*Professional property valuation
This cost is not usually incurred by purchasers buying through an estate agent, however, if the sale is without the intervention of an estate agent, it is almost certain that you will need to incur this cost.
Expect to pay $350.00+ for a valuation for Stamp Duty purposes. Obtain a quote directly from a property valuer. Please note that a free, estate agent’s appraisal is not an acceptable substitute.
*FIRB (Foreign Investment Review Board) costs
Only for “foreign purchasers”. Foreign purchasers will need permission from FIRB to purchase a property in Australia. This application must be made well in advance of exchanging contracts. The Revenue NSW website contains the definition of “foreign purchaser”. Current fees updated 2021 (based on property price):
$1 million or less: $5,600
$1 million to $1,999,999: $11,300
$2 million to $2,999,999: $22,700
*Penalties
For settlement delayed e.g. due to finances not being ready or for other reasons such as ill-health. Refer to the contract for more information. Your conveyancer or solicitor can help you avoid these costs altogether. In most settlements, no penalties are paid because the settlement proceeds on time.
Taxes associated with the purchase of a home
Transferee Duty (Stamp Duty)
This tax is determined by the value of the property. The value of the property is normally the purchase price.
Use an online calculator to assist you to work this out. We recommend Revenue NSW’s Stamp Duty Calculator. These costs can be quite significant. Certain Home Buyers may be exempted or pay the reduced duty, but not all. Revenue NSW has information online to help you determine whether you qualify for an exemption. Speak to your broker or mortgagee about other concessions that may be available to you to assist with this cost – e.g., New Home Grant, First Home Super Saver Scheme, First Home Loan Deposit Scheme.
*Premium Transferee Duty
For large properties or properties where the purchase price is $3 million or more. No exemptions or concessions will apply.
*GST
For off-plan purchases or substantially renovated properties
Check the contract to see whether GST is payable, and if so, whether it is included or in addition to the purchase price. GST on top of the purchase price adds 10% of the property value/price to the property.
*Land Tax
Only where purchasing a property that is liable for Land Tax. Usually, this property would be an ex-rental or other investment property so if you are buying one, be aware that you might need to budget for this tax.
Check the contract to see whether Land Tax is payable before you exchange contracts. Your solicitor/conveyancer can also obtain a Land Tax certificate for you to check the Land Tax status for the property. Land Tax can add a few thousand dollars to the overall costs, so it is worth checking whether the property is registered for Land Tax before you exchange contracts. If Land Tax is payable, it is usually adjusted between the vendor and purchaser.
*Surcharge taxes (Surcharge transfer duty and surcharge land tax)
Payable only by “foreign purchasers”. The cost of the additional duty is significant.
If you are unsure whether you are a “foreign purchaser” make inquiries with ATO. Australian Permanent Residents and New Zealanders on a Class 444 visa are exempted at the time of writing. Foreigners married to or in a de facto relationship with an Australian citizen or Australian permanent resident and who have a partner visa are generally exempted for purposes of buying the family home.
Costs associated with a new mortgage (if any)
*Lenders Mortgage Insurance
Generally required if the purchaser cannot put down a deposit equal to 20% of the property price (or value) – i.e. the loan-to-value ratio (LVR) is more than 80%.
Speak to your broker or mortgagee. Costs can be quite significant. This cost is charged to you upfront at settlement and is included in the amount loaned to you in the mortgage, so you will pay it off over the term of your mortgage.
*Mortgage processing fees
Usually between $350.00-$450.00 plus costs of bank valuation.
Mortgage registration fees
Currently $147.70 in NSW (2021/2022) per mortgage registered.
Transfer registration fee
Currently $147.70 in NSW (2021/2022) per transfer.
Other costs
*Mortgage Protection Insurance
This mortgage protects you from default in your loan and/or destruction
Variable ongoing, monthly cost for the duration of your mortgage. Your mortgagee will not lend you money without you having this insurance in place.
*Accountant’s fee/tax advisor fees
Recommended for those purchasing an investment or where other special circumstances apply. You may wish to obtain this advice prior to your purchase, rather than after.
Per quote from your accountant/ tax advisor/ financial planner.
Financial buffer
To pay for unexpected expenses incurred. Ideally, you would have set aside $3,000.00-$5,000 to pay for any unexpected costs incurred during or after the settlement process.
Costs to budget for immediately after settlement
Removalists costs
Obtain quote from removalist. Remember to book early if you are moving over a holiday period.
Cleaning costs
Obtain quotes from cleaners or rope in friends and family.
Mortgage
This cost will depend on a variety of factors such as the cost of the property you purchased, the interest rate you obtained (and that cost is related to your risk of default), annual mortgage charges, the term of the loan, the cost of mortgage insurance and whether you make any additional payments over the term of the mortgage.
Costs will be disclosed to you prior to you signing the mortgage documents. You should not exchange contracts without final mortgage approval and without knowing what this monthly/ fortnightly cost will be. Remember, if you are accepting a variable rate on your mortgage, that rate may change immediately after settlement and affect your repayments.
Council Rates, Water Rates, *Levies
You can ask the estate agent about these costs prior to making an offer or exchanging contracts. Levies are only payable for strata and community title.
Utilities
Electricity, gas, telephone, sewerage (if not on town sewerage).
*Other
For example, immediate repairs or improvements or renovations, garden maintenance or even costs of demolishing and building a new property on the land.
There may be other costs that need paying soon after settlement that will depend on the property you are purchasing and what your requirements are.
*Other insurances
For example, life insurance, disability insurance, *landlord’s insurance.
If you have dependents relying on you to meet the mortgage and other costs associated with home ownership (and even if you’re free and single!) we recommend you protect yourself and your family by taking out necessary additional insurance.
Obtain a quote from your insurer.
*Other legal
For example, Wills, Powers of Attorney
All property owners are encouraged to have a will, particularly single property owners or those who have purchased the property as a tenant in common. If you are overseas or unavailable for parts of the property transaction, you may need to appoint an attorney to manage the purchase for you.
From $300.00+
