Many first home buyers are itching to break into the property market in the next year, going for that 'golden' 20% deposit, but this property expert says it's important to have money saved for all the other costs when buying property.

Lloyd Edge, Director of Aus Property Professionals, said if interest rates rise in line with Westpac's predictions, there isn't much room for first-time buyers to make higher repayments without 'significant' budgeting and possible mortgage stress.

"Property investment has the ability to transform your life, as you can achieve financial freedom and have more time to enjoy life," Mr Edge said.

"But, it’s important to note that the entire journey can be quite overwhelming and sometimes confusing, leading buyers to forget about the hidden costs of buying property."

With this in mind, these are the top five hidden costs when buying property every buyer should be wary of.


Pictured: Lloyd Edge. Image Supplied

1. Lenders mortgage insurance

You may have heard of lenders mortgage insurance (LMI), but understanding what it is and how much it can cost you is highly important.

If you're unable to get past that 20% deposit mark, and you're unable to nab any government assistance to back you, you will likely need to pay LMI.

However a common misconception is that LMI protects the borrower.

"LMI protects your lender against the risk of default to cover any shortfall and is a one-off fee for the property," Mr Edge said.

"That is, in the event you have to sell your property or default, and the sale price of your home is not enough to cover the amount you owe on your loan, it pays the balance to the lender. Be aware that it is there to protect your lender, not you."

Mr Lloyd said the amount of insurance you'll need to pay will vary, and depends on factors like the size of the loan and size of your deposit. It can also vary from lender to lender.

"Always discuss this with your bank or mortgage broker before signing any loan documents."

2. Legal fees

Hiring a solicitor to help with your contract of sale (COS), mortgage documents, having any searches carried out on the property, and having legal documents prepared costs money.

"The conveyancer or solicitor reviews the COS and communicates the terms and conditions to the purchaser," Mr Edge said.

"This can cost anywhere between $1,000 to $3,000 depending on the scope of work involved."

Mr Edge said it's also important to note that there's a difference between a conveyancer and a solicitor, which could see differences in fees.

3. Building and pest inspection

A building and pest inspection is optional, but highly recommended by many property experts, where a licenced builder carries out a thorough inspection and writes a report with the findings.

Mr Edge said this usually costs around $400 to $800 depending on the property and where you live - city or regional.

"I strongly recommend getting a building and pest inspection done for any property you are serious about purchasing," Mr Edge said.

"It can give you peace of mind and help you to avoid costly problems later on. If issues do occur you may be able to negotiate further on your purchase price or even rescind the sale if there are major structural problems or termite damage."

Mr Edge said building and pest reports don't normally cover everything, and inspectors can recommend for you to get further inspections by an electrician or plumber.

"It is a general inspection and the inspector usually notes that they are not licensed to advise on certain issues," he said.

4. Stamp duty

Stamp duty is a state government tax you are required to pay when you purchase land. The amount varies from state to state, and can depend on things like the value of your property and where it is located.

First home buyers can be exempt from paying stamp duty, but if no exception applies, it can cost tens of thousands of dollars.

"For instance a $1 million residential home in NSW can cost you around $40,000 in stamp duty, which equates to 4%," Mr Edge said.

5. Loan application fee

Also known as an establishment fee, upfront fee, start up fee, or set up fee, your loan application fee is incurred when you apply for your new mortgage.

"If you aren’t charged this fee, you may be charged higher ongoing fees," Mr Edge said.

"Always check with your lender before signing any paperwork."


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured 4.6 Star Customer Ratings
  • No monthly or ongoing fees
  • Unlimited free redraw
  • No application fee
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.09% p.a.
6.11% p.a.
Principal & Interest
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Image by Mikhaul Vasilyev on Unsplash

Ready, Set, Buy!

Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!

With bonus Q&A sheet and Crossword!

By subscribing you agree to our privacy policy