Purchasing a property is one of the biggest investments most people make. However, it’s important to understand that there are a number of hidden costs that come with purchasing a property.

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Stamp Duty

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When you buy property in Australia you are normally required to pay stamp duty. Stamp duty is a state-based one-off transaction tax based on the value of the property.

The rate of stamp duty that you are required to pay and when you need to pay it varies from state-to-state and is updated regularly.

First home buyers who meet certain criteria are not required to pay stamp duty. However, this varies based on each state and territory.

NSW

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Stamp duty is waived upon purchase of new property valued up to $800,000 for first home
buyers, and partial concession is available for homes valued between $800,000 and
$1 million. Stamp duty is waived on the purchase of an existing property valued up to $650,000, and partial concession is available for homes valued between $650,000 and $800,000.

VIC

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Stamp duty is waived upon purchase of property valued up to $600,000 for first home
buyers. Properties worth $600,001 to $750,000 will receive the first home buyer duty concession.

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NT

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There is a stamp duty discount on the purchase of a property valued up to $650,000 for first home buyers.

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QLD

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Stamp duty is waived on property purchases valued up to $550,000 for first home buyers.

SA

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There are no stamp duty exemptions.

TAS

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There’s a 50% stamp duty exemption upon purchase of property valued up to $400,000 for first home buyers.

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WA

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Stamp duty is waived on property purchases valued up to $530,000 for a house and land, for first home buyers.

Conveyancing and legal fees

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Finalising the transaction and sorting out all the paperwork that’s involved is known as conveyancing.

Normally when you purchase a property, you hire a conveyancer (also known as a settlement agent) to do the work on your behalf.

The cost of hiring a conveyancer is normally around $1,000-$2,000 and this will vary between states.

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LMI

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Lenders Mortgage Insurance (LMI) is a one-off insurance premium put in place to protect the lender when the borrower needs to finance more than 80% of the value of the property they are purchasing.

Typically, a lender likes to have a 20% deposit, so they are protected if the borrower defaults and the property must be sold.

LMI is normally upward of $10,000 and changes based on how much the property is worth and the LVR of the borrower. However, it can at times be lower if the borrower has an LVR close to 80%.

Unlike other costs, it is possible to include LMI in your loan, which can reduce the burden on home buyers.

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Loan Application (Settlement) costs

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When you apply for a loan, you will normally be required to pay an application fee to the lender.

This changes with the type of loan you require, how much it’s worth and how a lender views your track record with credit.

A normal loan application fee is normally somewhere around $100-$600 for a standard loan.

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Valuation fees

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When you purchase a property that is subject to finance, a lender will normally require the property to be valued by a professional evaluator.

This gives them a level of comfort the property is worth what you’ve paid for it. You will be required to pay the cost of the valuation, which is generally around $400-$500.

A valuation fee is normally not payable by the borrower for residential property for a standard valuation of up to $3 million. Lenders may charge for high-end properties over $3 million or if they have to do a long-form valuation.

The valuation fee is payable for commercial valuation and ranges from $1,000 to $4,000.

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Building and Pest Inspection

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In many states, if you’re buying through an offer and acceptance, it will normally be subject to a building and pest inspection. If buying through auction, you might be required to undertake an inspection yourself prior to auction.

Building and pest inspections are often done for freestanding homes or townhouses, whereas for units and apartments a strata report is normally required.

The cost of a building and pest inspection is usually around $500.

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Insurance

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Once you’ve settled on your property, the first thing you will likely want to do is take out some form of home and building insurance.

If you purchase a freestanding home, these costs will be all on you, however, with a strata, this would normally be included in the ongoing strata fees. If you are renting the property out as an investment, then you might want to consider landlord insurance.

The costs vary depending on how much cover you require and the value of the property. Costs will also consider if there are any other factors involved, such as bushfires, flooding or other risks from natural disasters.

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Strata fees

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If you’ve purchased a strata titled property, you might be required to pay ongoing strata fees.

The cost of these fees vary depending on the age and condition of the building, as well as any amenities that require ongoing maintenance. Not all strata titled buildings have strata fees.

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