hidden costs of buying a house

The Costs of Buying a House

It’s important to be aware of all of the costs of buying a house or apartment.  The most obvious cost is the purchase price of the property, but there are other significant costs you need to factor into your budget.

Below are the major costs of buying a house in Sydney:

  • Transfer Duty (formerly known as Stamp Duty)

    Transfer Duty

    This is the largest of your costs of buying a house after the purchase price of your property.

    Transfer Duty is a NSW Government tax payable on the purchase price of your property – the higher the price you pay, the higher the Transfer Duty payable.  Click here for the Office of State Revenue Transfer Duty Calculator.

    If you’re a first home buyer, you may be entitled to a concessional rate of transfer duty or an exemption from paying it altogether under the First Home Buyers Assistance scheme (FHBAS). First home buyers purchasing a new or existing home valued at less than $650,000 can apply for a transfer exemption, or a new or existing home valued between $650,000-$800,000 can apply for a concessional rate. Click here for the First Homebuyers Assistance Calculator.

    From 16th January, 2023, first home buyers purchasing a property up to the value of $1,500,000 will be able to choose between the current Transfer Duty and the payment of an annual property tax. This scheme is called First Home Buyer Choice.

    The annual property tax payments will be based on the land value of the purchased property. The property tax rates for 2022-23 will be:

    • $400 plus 0.3 per cent of land value for properties whose owners live in them
    • $1,500 plus 1.1 per cent of land value for investment properties.

    These tax rates will be indexed each year, so that the average property tax payment rises in line with average incomes.

    Premium Transfer Duty

    Premium Transfer Duty is payable on property purchases over $3,268,000 (for 22/23) at a rate of $163,940 plus $7.00 for every $100 over  $3,268,000. Click here for the Office of State Revenue Transfer Duty Calculator

  • Loan Application, Legal and Valuation Fees

    If you are borrowing money to purchase your property, there may be a range of fees charged by the lender, such as loan establishment fees, valuation fees, and ongoing account-keeping fees.

    These charges vary according to institution.  Check with your lender.

  • Lenders Mortgage Insurance

    This is a one off payment designed to protect the lender if you default on your home loan. It is payable if you are borrowing more than 80% of the home’s value.  The fee depends on your lender, and your loan to value ratio.

    Some professions can apply for a lenders mortgage insurance waiver.  If you are a legal, medical or accounting professional seek further advice from your mortgage broker or lender.

  • Conveyancing Fees

    When you purchase your property, you will need to engage the services of a conveyancer or solicitor to facilitate the legal aspects of the purchase.

    Legal fees vary depending on the property and the complexity of the transaction.  Check fees with your conveyancer of solicitor as charges vary.

  • Building and Pest Reports

    This is one of those costs of buying a house that is absolutely essential!

    A building and pest inspection will divulge any potential issues with the physical condition of your property.  Things such as structural damage, termite infestations, or other pest issues.

    The costs of a building and pest inspection vary according to the size of the property to be inspected.  As a guide, for an average sized house in Sydney the cost will usually be around $500.

    Sometimes these inspections are paid for by the vendor or by the final purchaser but it’s important to keep some funds set aside in case needed.

  • Strata Reports

    If you are purchasing an apartment you’ll need to arrange a strata inspection.  This is to review the strata records and by-laws, check for any building or maintenance issues, and evaluate the financial health of the strata scheme, including the strata levies and insurance coverage.

    These start at $250 and depend on the size of the Owners Corporation.

  • Other costs

    Remember to factor in moving costs, the largest one likely being the cost of a removalist.  Ask friends and family for their recommendations. The cost will depend on how much you will be moving, the distance between properties plus potential accessibility issues such as stairs, lifts etc.

    Don’t forget when calculating the costs of buying a house, you should also consider your ongoing costs. Remember building and contents insurances, strata levies for apartment purchases plus council and water rates as well.