It’s not just the deposit you’ll need to cover when you buy a home. There’s a bunch of other fees and charges – including stamp duty – which get bundled into the costs you need to pay, upfront.
When saving up for a home loan you may just be thinking about putting money aside for a deposit. This is a good start, but there are a few other upfront costs that you’ll need to account for when saving up for a home loan. You’ll need to consider covering the cost of some fees and Government charges as well. Things like Lenders’ Mortgage Insurance (LMI), stamp duty, mortgage registration and title transfer fees, application/processing/settlement fees, valuation fees, and conveyancer fees can all take a chunk out of that little nest egg you’ve saved up, leaving you less than you thought for your deposit. If this all sounds a little overwhelming, that’s ok, we’ll break it all down for you.
Each state has different fees associated with purchasing a home, so the exact cost you need to cover will differ depending on where you live. Your best bet is to check with your State Government to see what they charge and get an exact figure.
But to give you a general idea of how it works and what you’ll be charged for, here are the upfront costs if you’re looking to buy a $700,000 home in Melbourne.
This is the obvious one you’ve probably already thought about. Most lenders will ask for at least 5% of the value of the property, which in this case would be $35,000. But, anything less than a 20% deposit, and you’ll be charged Lenders’ Mortgage Insurance (see below). In this scenario, a 20% deposit would be $140,000.
Lenders’ Mortgage Insurance (LMI)
If you have less than a 20% deposit you’ll probably need to cover the cost of LMI. This is a one-off insurance payment, which protects the lender in case you can’t make your repayments. A smaller deposit means your lender needs to give you more money, so there is a cost associated. Although an additional cost to the lending process, it can be a great mechanism to get purchasers into a home quickly without having to save the 20% deposit, this makes LMI handy even if you aren’t a first home buyer.
This is a State Government tax based on the purchase price of the property. Each state and territory have different rules and calculations, and it’s unavoidable. Bah humbug. For your $700,000 established home in Victoria, your stamp duty will be around $37,000.
|State||Cost of Stamp Duty, based on a $700,000 existing property to live in. Fees can vary depending on individual & property circumstances.|
|Australian Capital Territory||$20,040|
|New South Wales||$10,402|
|This data is current as at 5 January 2022.|
Registration of Mortgage and title transfer
This is the cost of registering the land title with your State Government and transferring to your name, and unfortunately, it’s mandatory. In Victoria, together these fees will cost you around $1,800.
|State||Registration of mortgage||Title transfer|
|Australian Capital Territory||$155||$416|
|New South Wales||$147.70||$147.70|
|Northern Territory||$152 (+ $58 for each additional C/T after the first)||$152 (+ $58 for each additional C/T after the first)|
|Queensland||$197||Based on consideration (purchase price)|
|South Australia||$176||Based on consideration (purchase price)|
|Victoria||$121.40||Based on consideration (purchase price)|
|This data is current as at 5 January 2022|
Loan application/processing/settlement fee
These are the fees your lender will charge for applying and settling a home loan with them. It covers all the work the humans do, like filling out paperwork and meeting you for a loan interview. And it can cost you around the $800 mark. If you want to avoid this look for online lenders who don’t charge these fees. Online lenders tend to be a lower fee option.
This is a fee your lender will charge you to arrange an independent valuer to assess the dollar value of the property you’re planning to buy, based on the current market. A property value will change over time, so you may get hit with this every time you ask for a valuation. Not all lenders charge this. With the right lender this fee is one you can potentially avoid.
Your conveyancer will charge you to prepare your loan documents (such as the contract of sale and memorandum of transfer) and to liaise with your lender and existing property owner on your behalf. It’s in your best interest to appoint someone to ensure you’re protected and legally safe. But it’s not legally required. Costs can vary based on the complexity of the loan you’re taking out, but it’s around the $1000 mark. And generally worth every cent.
Building inspection fee
You’ll need a building inspection to check for termites and structural issues. This could set you back anywhere from $200 to $430.
So, what’s the damage?
This is how much you’ll need upfront to buy your $700,000 established home in Victoria:
|What you'll need upfront|
|Mortgage title and transfer||$1,839|
|Building inspection fee||$200-620|
|Loan application / Processing / Settlement Fee||$0-800|
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