How to: Work out how much buying a home costs
When first home buyers are saving, it's often all about the deposit. When they've saved 5% or 10% of the purchase price, they're likely to then find that a number of other costs delay their home ownership dream for even longer.
What are these costs, and how much do you need to be prepared to save?
Let's assume you're buying your first home for $300,000 in Victoria and you have a 5% deposit ($15,000). It's an established property, and not that far from where you currently rent. Grants currently exist for those buying new in Victoria, however are not applicable in this instance.
CURRENT TOTAL: $15,000
The loan process will cost you something like the following:
This means you'll be taking out a $285,000 loan and that you'll need Lenders Mortgage Insurance. This varies from lender to lender. At Westpac, it's estimated at $7,397, however a quick search online shows fees from the $7,000 to $8,000 mark generally.
Some lenders do allow you to capitalise, that is, add this to the top of the loan amount. However, for the sake of this exercise, we'll assume you will pay the fee upfront to avoid paying further interest down the track.
CURRENT TOTAL: $22,500
You then have stamp duty on the loan amount, which amounts to around $1,000. There is also around $7,000 in stamp duty (this varies by state. The relevant Office of State Revenue can assist in working out this fee. This amount is a reduction on the usual fee due to the first home buyer status of our purchaser).
CURRENT TOTAL: $30,500
You will need to register your mortgage - usually a flat rate of about $100. And then you can throw in the establishment of loan fee and legal costs which, together, usually amount to around $1,000.
CURRENT TOTAL: $31,600
Looking at the buying process and ignoring 'hard to calculate' costs such as your own time, travel expenses and similar as you search (as well as any paid-for online searches that some will undertake), you can easily estimate up to another $1,500 in checks (such as building and pest inspections, which can typically be around $500) and legal expenses in the buying process as well.
CURRENT TOTAL: $33,100
After all is said and done, you then need to pay for your moving costs from where you currently live into your new home. Assuming that our buyer in this situation is a renter in a smallish apartment let's assume that cleaning costs may amount to $100 (for carpet steam cleaning) and then some moving costs. Service Central estimates up to $500 for a couple living in an apartment. If you're moving interstate or from long distances away, this could easily span into the thousands of dollars.
CURRENT TOTAL: $33,700
OTHER POTENTIAL COSTS:
Buyer's agent fee
Connection fee for services (not common)
The "unknown" factor. Perhaps you will have minor renovations or home improvements, such as painting, to make your place feel like home. You may even need to purchase new furniture or similar.
How much did it cost you to buy and move into your latest property? What other hidden costs are there?