Hidden costs to keep in mind when buying a house

buying a house

Money is the most important consideration when buying a house. Your budget determines the type of home you can purchase, the financing you’ll be eligible for and your monthly repayments.

Your monthly repayment amount needs to be affordable enough for you to cover it and your other living costs comfortably. But for many people, this isn’t the case.

It’s estimated that almost a million homeowners could default on their home loans if interest rates rise by just 0.15%. So if you’re planning to buy a home, make sure you’ll be able to make the repayments even if there’s an interest rate increase.

HIDDEN COST #1 – STAMP DUTY

At the time of writing, if you’re purchasing your first home in Victoria, New South Wales or Queensland, Australia, you won’t have to pay stamp duty. However, if you already own one property and want to buy another, you’ll have to pay up to $21 000, depending on the value of that property. Use one of the free stamp duty calculators available online to work out the potential stamp duty before taking the plunge.

HIDDEN COSTS #2 – INSPECTIONS

Paying for home inspections is more of an investment than a hidden cost. You could find a defect that knocks thousands off the purchase price and if you know that you’re going to need to repair something in a few years’ time, you can start saving for that repair today. The cost of an inspection can be up to $1,000.

HIDDEN COST #3 – MORTGAGE RELATED FEES

Most people will need to finance their home purchase, and this will incur various fees. You are required to register your mortgage with the state.

Most financial institutions charge a premium for mortgage repayments on deals where the deposit is less than 20%. The large repayment amount is to ensure that the bank is protected should you default or sell for less than you owe. The bank will more than likely charge an loan application fee.

There is no set amount for mortgage-related costs, so it’s recommended you put away about $2 000 to cover them upfront.

HIDDEN COST #4 LEGAL FEES

As you can see, there are many costs involved with buying a home, as well as documents to be filled out, transferred and filed. It’s worth getting a lawyer or conveyancer to handle the paperwork for you as they know the ins and outs of the process and you’ll be able to focus on the important job of moving.

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