The upfront and hidden costs of buying a home

Just as with any big life decision, preparation is key when it comes to buying a property. 

While the journey to homeownership can be a hugely exciting one, it’s also a process that comes with a wide range of costs - some of which you may not be expecting.

To help you both prepare for upfront costs and avoid the unwanted surprise of hidden ones, here’s a comprehensive breakdown of the costs involved in buying a property in Australia.

The upfront costs of buying a home

When we talk about upfront costs, we’re referring to the immediate expenses you’ll face when purchasing a home.

These upfront costs include:

• Deposit: This will be a percentage of your purchase price (typically 10-20%) and is the most substantial upfront cost in the home-buying process.

• Stamp duty: This is a government tax that varies by state and property value. There may be concessions or exemptions available for first-time buyers, so be sure to check if you’re eligible for any incentives.

• Legal and conveyancing fees: These fees cover the cost of the legal assistance needed to transfer the property’s title into your name.

• Inspections: From building inspections to pest inspections, it’s essential to ensure the property is in a suitable condition before you decide to buy.

• Loan application fees: Some lenders charge a fee for processing your home loan application.

• Mortgage registration and transfer fees: These fees are charged by the government to cover the cost of registering your mortgage and transferring the property title.

• Lenders Mortgage Insurance (LMI): LMI is designed to protect the lender if you default on the loan. You may need to pay this if your deposit is less than 20% of the purchase price.

The hidden costs of buying a home

We’ve explored the upfront costs of purchasing a property, but what about the hidden expenses that you might not have thought of? These may include:

• Insurance costs: Appropriate home and contents insurance is a crucial consideration. Depending on your property’s location, you may also need to consider other types of insurance, such as flood or fire.

• Council rates and utility connections: As a homeowner, you'll need to pay council rates and may incur costs for connecting utilities like electricity, gas, and water.

• Maintenance and repairs: You’ll need to factor in the ongoing costs of property maintenance, repairs and upkeep, which can vary significantly depending on the property's age and condition.

• Strata fees: If you're buying an apartment or unit, you'll need to pay strata fees to cover building maintenance and communal facilities.

• Home improvements and renovations: You might want to make immediate changes or improvements to the property, which can be a substantial additional cost.

• Furniture and appliances: If you’re upsizing or moving out of home for the first time, you may need to budget for setting up your new place with furniture and appliances. 

• Moving costs: Hiring movers or renting a truck to move your belongings can be a considerable extra expense.

• Interest costs over time: Depending on your loan’s interest rate and term, the interest you pay over the life of your mortgage can exceed the original loan amount.

How to prepare for upfront and hidden costs

To avoid getting caught out by the many costs involved in buying a property, it’s important to be prepared for both upfront and hidden expenses:

1. Create a budget: List all potential expenses in a spreadsheet so you can account for the different costs involved. 

2. Make a savings plan: Aim to save more than just your deposit, so you can be ready for the additional expenses you may face.

3. Explore your options: Look into different home loans, insurance policies, and service providers to find the best deals.

4. List the ongoing costs: Consider all the ongoing costs associated with your property and plan your finances accordingly.

5. Seek professional advice: A financial advisor or mortgage broker can help you understand and prepare for both upfront and hidden property costs.

While you might be focused on simply paying the purchase price of your new home, it’s crucial to be aware of all the potential costs involved in buying a property. By being prepared for these costs, you can avoid nasty surprises down the track, making your journey to home ownership a whole lot smoother.

Keen to learn more about the home-buying process? Check out our other articles and stay in the know about all things home loans.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.