The Real Cost of Buying a Home in NSW

Buying a home is one of the biggest investments you’ll ever make. And, the truth is, unlike buying a piece of clothing from your favourite store, the price on the tag isn’t what you’ll end up paying. 

In this post, we’re uncovering the real cost of buying a home. You’ll find out about the upfront, hidden and ongoing costs you’ll need to budget for – now! 

Upfront Costs of Buying a Home

Home Loan Deposit

In NSW, lenders usually expect home buyers to have a deposit of between 5 – 10% of the purchase price. Although, a 20% home loan deposit is more desirable as it reduces the risk to the bank and helps you avoid paying costly lenders mortgage insurance (more on that later). 

If you’re a first-time home-buyer, check out the financial assistance available under the NSW and federal government first home buyers schemes. The truth is, the bigger the deposit you can contribute, the better!

Example: In Cessnock, the average home is around $580,000, so you’ll likely require a deposit of between $29,000 and $116,000.

Transfer Duty (previously Stamp Duty)

You must pay transfer duty in NSW if you’re buying:

• A home (including a holiday home)
• Vacant land or farming property
• An investment property
• A business where the sale includes land
• Commercial or industrial properties

You must also pay transfer duty when you acquire land, or an interest in land, without buying it. 

This includes the following situations:

• A declaration of trust
• A gift
• A transaction effecting a change in the beneficial property ownership.

The amount you pay for transfer duty depends on the market value of the property you’re buying. The higher the value, the more transfer duty you’ll be required to pay. Some exemptions exist, and you may also be eligible for transfer duty concessions as a first home buyer in NSW under the First Home Buyers Assistance Scheme. 

Example: You purchase an existing home in Kurri Kurri for $620,000. Without considering any exemptions or concessions, you’ll likely pay a transfer duty of $22,990.

TIP: Use the Revenue NSW Calculators, Transfer of land or business calculator to work out your transfer duty costs.

Legal and Conveyance Fees

Buying a house is a complex transaction.

Between the title searches, reviewing the contract of sale, calculating settlement adjustments, and ensuring that you comply with the legal requirements of the transaction – a conveyancer or solicitor helps make the process go as smoothly as possible.

Deciding if you’re going to engage a solicitor or licensed conveyancer depends on the complexity of the transaction, whether other legal matters are involved, your budget and the state you’re buying in.

Generally, licensed conveyancers are less expensive, specialise in buying and selling property and offer a professional conveyancing service.

Example: The average conveyancing fees in NSW are between $1000 and $2,500. Some conveyancers may also charge disbursements on top of the fee. Here at Oliver & Co. Conveyancing, we generally don’t do this, and we offer free fixed-fee conveyancing quotes, so you always know your costs upfront. 

Mortgage Registration

A mortgage registration fee registers the physical property as the security on a home loan. The fee is payable at settlement and varies in each matter.  

Example: The cost of this fee varies across Australian states and territories, but in NSW, you’re looking at a mortgage registration fee of approximately $155.

Home Loan Fees

Everywhere you turn, there are account keeping fees, transaction fees, out-of-network ATM charges and early account closing fees. Home loans are not exempt from fees, but there are ways to reduce the blow to your budget. 

Home loan fees are broadly broken down into four categories:

• Fees paid at settlements
• Fees that may apply for the duration of your home loan
• Fees for home loan features (like adding offset accounts)
• Fees for repaying your loan early, switching loan products or refinancing.

Your choice of lender determines the fees charged, so it pays to do your research and shop around for the best deal. Don’t feel you’ve got to stay with your current bank if another lender offers special promotions. For example, some lenders in the past have offered cashback deals or bonus credit card points just for making the switch. 

Example: As mentioned, it’s difficult to calculate what your home loan fees will be as they vary across lenders. According to Canstar, in 2021, the average upfront home loan fees included: application fees of $504; valuation fees of $366; legal fees of $316; and settlement fees of $225. Average ongoing fees included annual package fees of $366 and monthly fees of $9. On average, to discharge a loan, the cost was $316 but could be as high as $895.

As you can see, it all adds up. 

Inspection Fees

Unexpected issues that crop up after you’ve bought your dream home are a buyer’s worst nightmare. Imagine finding out a few weeks after you move in that the roof is faulty or there’s water damage you couldn’t see. Rectifying these issues is an extra expense that you didn’t budget for. That’s why paying for pre-purchase inspections on the property is essential.

Building and pest inspections by licensed contractors are a must! Inspectors can see through any cosmetic touch-ups covering issues and identify any nasty and costly pest infestations.

If you’re buying a unit, duplex or townhouse that is part of a strata scheme, you should get a strata inspection report. These cover the physical internal and external building inspections, consider waterproofing and assess whether the building adheres to fire rules and insurance requirements. 

Example: There is no flat rate fee for pre-purchase building and pest inspections in NSW, so shop around. In the Hunter Valley region, you can expect the following prices:

• From $399 for an individual building, pest or electrical inspection
• Between $460 to $900 for a combined building, pest and electrical inspection (depending on the size of your house).

These prices are starting points and vary on the area that you live in. 

Removalist Costs

You can save big dollars by DIY moving – but most people don’t want the hassle and headaches that come with it. The cost of moving homes varies depending on a range of factors – like how much you’ve got to move, where you’re moving to, whether you’re going to pack your boxes, and the availability of access to your new property (i.e. parking or if there are stairs).

Example: Expect a removalist cost from $300 – $3,500 – depending on the service you use and your specific circumstances. If you’re moving interstate, the prices may be higher. Many removalists have calculators on their websites that you can use to estimate your costs. And, if you’re moving around the Hunter Valley region, check out Doug Kirk Removals or consider a service like Muval.

Utility Connections

Nothing will be worse than rocking up on moving day to discover you didn’t organise your power or water connections. The process can take several weeks, so as soon as you know your move-in day – get this one sorted and off your ‘to-do’ list. 

Example: Depending on where you’re located in NSW, the costs for connections will be set by the electricity, gas and water providers you choose. On average, electricity and gas connections cost between $45 to $110 each. In terms of water connections, these are set by your area’s water authority and there are generally no additional connection fees for change of ownership unless water has been cut off.

The Hidden Costs of Buying a home

Settlement Adjustments

Adjustments refer to the ‘splitting of costs’ between buyers and sellers for certain costs associated with a property. The process ensures that neither the buyer nor seller are paying for costs when they didn’t own the property. For example, if the seller has paid land charges for a time when the buyer will own the property, then the buyer reimburses the seller their share by adding it to the purchase price.

As a buyer, factor in extra costs for adjustments. In most cases, these are paid by the buyer in favour of the seller.
Example: You buy a property halfway through the year where the annual rates cost $1,200.  The vendor owned the property for 183  days, and you will own it for 182 days. We assume that the rates have already been paid, so you’ll need to pay your portion, approximately $598.

Duty Interest

We mentioned your requirement to pay transfer (or stamp) duty earlier in this article. You must pay duty within three months of the exchange of contracts or by settlement, whichever is earlier. For the most part, your conveyancer or solicitor will handle the transfer. But be aware that if you don’t pay your transfer duty on time, the NSW government will charge you interest on the amount you owe, and you may also be charged additional penalties. 

Example: The rate of interest or penalty charged will vary depending on the circumstances of the tax default. It’s best to avoid this situation.

Lenders Mortgage Insurance

According to the Insurance Council of Australia, Lenders Mortgage Insurance (LMI) is:

‘insurance that a lender takes out to insure itself against the risk of not recovering the outstanding loan balance if you, the borrower, are unable to meet your loan payments and the property is sold for less than the outstanding loan balance’.

Insurance Council of Australia

LMI is where the size of your deposit really matters because it’s calculated based on how much you can contribute to the purchase price. This one-off, non-refundable and non-transferrable premium is an additional cost added to your home loan. It’s also a cost often overlooked by homebuyers. 

Example: You purchase a home worth $620,000, and a lender would typically require you to have a 20% deposit, or $124,000. But, you’re only able to contribute $62,000.

You need to take out LMI for the bank to lend you the $558,000 required to purchase the property. 

Using the Home Loan Experts LMI calculator, the extra amount added to your loan for LMI would be around $14,500. A couple of things to note, if you’re a first home buyer, you may not need to pay LMI if you qualify for financial support under one of the NSW government’s first home buyer initiatives.

Ongoing Costs of Buying a Home

All the financial ‘fun’ of buying a new home doesn’t stop after settlement. Here are a few ongoing costs to keep in mind, especially if this is your first home:

• Annual mortgage and account keeping fees
• Quarterly rates, electricity, gas and water bills
• Home, building and contents insurance
• Strata or body corporate fees (if applicable)
• Annual pest inspections and treatments
• General home maintenance
• Unplanned expenses for breakages and repairs
• Renovations or remodelling (where required).

Be prepared for the real cost of buying a home

It’s easy to get wrapped up in the excitement of buying a home – especially if this is your first time. It will likely come as a surprise that the purchase price for a property is just the starting point. It pays to be aware of all the upfront, hidden and ongoing costs of buying a home, so you’re not caught out and risk not being able to make an offer on your dream home. 

We recommend doing your research, using online calculators and breaking it down into a simple budget. Of course, if you’re time-poor or unsure what to look for – let us help. We can help you uncover the real cost of buying a home in NSW.

As experienced conveyancers, we specialise in all types of property conveyance and frequently help our clients understand the costs involved with buying and selling a property. The best part is we offer a free 15-minute consultation with plenty of time to ask us questions. Just call our friendly team on (02) 4056 1070.

Ready to buy a property now? Complete our online conveyancing brief and receive a free fixed fee quote in hours.