Legal & conveyancing fees.These fees are part of the purchase transaction, when you seek assistance from a solicitor or conveyancer to help you prepare documentation and deal with the vendor on your behalf.
Stamp duty.This can be a huge expense when it comes to buying a property. It varies from state to state, though concessions exist for certain types of buyers (e.g., first home buyers).
Building & pest inspections.These are a must as they help ascertain that the property is in good condition and that no hidden issues can show up later on and incur unexpected expenses you have yet to budget for. In many cases, they can also provide you with a bona fide opportunity to renegotiate on the price.
Below are some ongoing costs often associated with owning and maintaining a property:
Water and council rates.These are charges that arrive on a quarterly basis and are specific to your own property.
Home and contents insurance.The cost of home insurance can vary from property to property, and from insurer to insurer, so be sure to research the market well to find the right policy for you.
Regular maintenance and repairs.It’s important to budget for regular maintenance and repairs, should the need arise. These types of expenses tend to be irregular but when they do occur, they can be expensive.
How to reduce the costs of buying a property
There are several options available to bring down the out-of-pocket expenses you have to spend upon buying a property, such as:
First home owners grants.Many states and territories offerhelp to eligible first home buyersin the form of a grant. It’s a one-off payment which is usually paid at the time of settlement to your home lender and applied directly to your home loan.
First home super saver scheme.Under theFirst Home Super Saver Scheme, first home savers can make voluntary concessional (taxed at a discounted rate of 15%) and non-concessional (already taxed at your marginal rate) contributions into their super fund which can be later withdrawn for a deposit on a first home.
Keystart and Homestart.Keystart is an initiative sponsored by the WA government, providing a number of low deposit solutions for WA home buyers. There are low-deposit home loans specific to the Perth metro area, some with deposits as low as 2%. Homestart, on the other hand, offers low-deposit home loans (as low as 3%) to eligible South Australians.
Stamp duty concessions.Most states and territories offer stamp duty discounts for first home buyers. Depending on the purchase price of the property and where you’re buying, you may even be exempt from paying stamp duty at all.
Buying a house is never as simple as walking into a real estate agency and slapping a thick wad of cash down onto the table. There are dozens of things you need to consider before purchasing. Here’s ahome buying checklistto get you started:
Work out what you can afford. It pays to know what you can or can’t afford. This helps you set a strict price limit so you don’t get carried away and go for a mortgage you’d struggle to repay.
Find a good home loan. Almost as important as your choice of property is your choice of home loan.Choosing a good value home loancan save you hundreds of thousands of dollars over the life of the loan.
Consider the property’s location. Where the house is should have a major impact on where you buy, whether it’s to live in or rent out.
Evaluate if the house is right for you. Once you’ve narrowed down to a few properties of interest, conduct an inspection of each property inside and out. It’s worth doing some research on the neighbourhood too.
Have the house professionally inspected. Professional inspectors will also look at potential structural and safety issues with the property that you might have otherwise missed, and could cost you a small fortune to fix later on.
Do a title and statutory authority search. A title search gives you an official record of a property’s ownership history and can tell you if there’s anything preventing you from buying it.
Negotiate a price. It’s important that you stick to your agreed upon budget, and take emotion out of the equation – it’s easy to see yourself living in a certain home, but if you can’t afford it you can’t afford it. Be prepared to walk away if you think the real estate agent is being unreasonable with their price expectations.
You normally need to put down a deposit that is equal to at least 5% of the value of the home to buy a house. For traditional banks, that’s usually the smallest deposit they will entertain, though many lenders will require at least 20%. If you cansave 20% deposit, you can avoid having to paylender mortgage insurance. Here are a few ways you can boost your savings for that down payment.
Consider moving back in with your parents or living with a flatmate. This will free up a big chunk of cash to pop straight into your savings.
Boost your income by either picking up a few more shifts at work, or a side hustle such as driving for Uber, pet sitting, doing some jobs on Airtasker, etc. You can also rent out what you’ve got but don’t use enough like car space or a spare bedroom.
If you have unwanted belongings or furniture lying around, selling them online is a quick way to earn that extra income.
Go easy on streaming services. Pick a favourite and cancel the rest, depositing the savings straight into your home deposit fund.
Automate your savings with ahigh-interest savings accountby setting up an automatic transfer so that a portion of your pay will go straight to your savings every month.
Consider investing, especially if you can’t find a decent savings interest rate anywhere. This will ensure that your savings aren’t eroded by inflation and can keep up with the rise in house prices. If you’re not familiar with investing, thisbeginner’s guide to investingmay be useful.
Taking public transport or riding to work can help you cut down on the costs of running and maintaining your car, not to mention the ever-increasingparking fees in the cities.
If you’ve recently got your tax refund or scored a pay rise, consider putting the extra income towards your house deposit to fast track your journey to home ownership.
Frequently asked questions
1. How long does it take to save for a house deposit?
How long it takes to save up for a house depends on your income, your expenses and where you want to buy. Depending on where you live in Australia, saving for a house deposit can take anywhere from a couple of years to nearly a decade. This doesn’t take into account rising house prices, which is one of the biggest challenges facing first home buyers.
2. Can I buy a house with no deposit?
You can’t really get a 100% deposit home loan from any of the traditional lenders. They might make case-by-case exceptions based on income or a person’s repayment history but as a general rule, you’ll need to cough up a minimum of 5% of the property’s value to be eligible for a home loan. Alternatively, you can consider taking out a home loan with a guarantor.
A display home is a home built by building companies to show off their design skills. They're usually very sleek, fancy homes in outer-suburbs with top-of-the-range features and amenities. You can buy display homes, but the process is a little different, and not always easy. Most lenders won't give you a loan for them.
Display homes usually have a leaseback period after you buy them, often no more than 24 months. The leaseback term involves you leasing the home back to the building company so it can continue to be used as a display home temporarily. After this, you can either move in or rent it out as a landlord.
Consult a mortgage broker or financial adviser before committing to a decision.
5. Should I buy a house before selling my own?
Usually people sell their home first, as this sale can fund their new home. But you can buy your new house then sell, as long as you're financially capable of doing so. But buying before you sell can have its complications - if you don't get as much as you thought you would, you could be in financial trouble.
Buying the new house before selling can remove the hassle of renting in between, but can also lead to greater selling pressure. If you move during a slow market, you might not get a good price for your old home.
Consult a mortgage broker or financial adviser before committing to a decision.
6. Should I buy a house that needs a renovation mortgage?
Buying a renovation house is up to you, but if your home requires work you can apply for a renovation loan, or renovation mortgage. These loans cover a large portion of the cost of renovations, as well as the purchase price of a new home if you're buying from scratch.
These loans function in much the same way as construction loans, as they allow you to draw down on funds as you need them throughout the various stages of renovation. They may only be available for larger renovations ($30,000 or more).
7. How much do I need to earn to buy a house?
How much you need to earn depends on the house you're buying. but you'll need to make and save enough money to pay both (1) the deposit, and (2) the monthly repayments and fees. You should generally earn enough money to avoid monthly mortgage stress.
Mortgage stress is when 30% or more of your take-home pay is devoted to mortgage repayments. Use a home loan calculator to work out what your potential repayments could be, and whether you have a suitable buffer in your salary.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
The big four banks are: ANZ, CBA, NAB and Westpac
The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
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