Buying your first home is perhaps one of the biggest financial decisions you’ll ever make in your life and it’s an excellent choice to get your life on the right track. But when setting aside a budget for your home, you should know that the cost of buying a house often exceeds the face value. This is because there are certain costs you will incur to finalise the purchase of the home. When you’re a first home buyer, these costs can seem intimidating. This guide is designed to help you determine the costs involved in buying a house, so you can set aside your budget accordingly.
Stamp Duty
Unfortunately, stamp duty is a necessary cost in the country if you want to buy a new house. This is a tax that you have to pay on the purchase price of the house. Here’s some good news for first home buyers − you don’t have to pay stamp duty on new homes that are worth less than $550,000. There is also a first home plus concession for new homes between $550,000 and $650,000. The NSW government also offers a first home owner grant up to $15,000 under the First Home Owner Grant (New Homes) scheme where the property value of the new home should not exceed $650,000. The amount of the grant will reduce to $10,000 from January 1, 2016. Keep in mind that these stamp duty concessions are only available if you purchase a brand new home.
Transfer Fees
Another fee you have to pay the government is a transfer registration fee. This is a onetime charge you pay in order to have the property transferred in your name. This is a nominal amount that doesn’t cost too much.
Mortgage Registration Fees
Each state government charges this fee for registering your home loan. Since the property acts as collateral for the loan, the government has mandated the registration of the loan, so that every claim can be checked by potential future buyers.
Inspection Fees
You might have to account for various inspection fees before purchasing a home. You may want to hire a valuation expert to appraise the home before you buy it to make sure you aren’t paying too much. Usually, if you are applying for a loan, the bank takes care of the valuation. Otherwise, you bear the inspection fees. You may also need to hire a building inspector to check the structural integrity of the construction before you buy the property. Finally, a pest inspection officer can help determine those pesky issues around the house.
Insurance
Insurance is an important cost you have to bear. You will need to take these different forms of insurance to protect your home.
Mortgage Insurance: Covers the lender and yourself in certain cases of default.
Building Insurance: Building insurance covers any structural damage to your house.
Contents Insurance: Protects the contents of your house in case of damage or a break in.
Depending on your situation, you may also incur other minor costs like moving and transportation, maintenance fees and renovation costs. Buying a new home is easier than you think if you prepare well and accommodate for these costs within your planned budget.