Hidden costs of buying a house

Buying a home isn’t just about saving a deposit, having pre-approved finance in place and then waiting for an offer to be accepted on that dream place.

Many novice buyers are surprised and often financially unprepared for the many associated costs that come with signing on the dotted line. Credit Union SA CEO, Grant Strawbridge, sheds some light on some of the hidden costs that can pop up during the buying process.

Pre-purchase inspections

For your own peace of mind, a pre-purchase building and pest inspection done by a trained professional is an essential investment. While there is a fee attached, going into a purchase with a clear understanding of the current condition of a home and any potential issues to be addressed could save thousands in repair costs and put you in a stronger bargaining position.

Stamp duty

In South Australia all buyers – including first home buyers - have to pay stamp duty, which can be as high as $18,000 on a median priced home of $430,000. That is why it pays to be mindful that stamp duty can take a hefty chunk out of a budget.

Lenders Mortgage Insurance

Lenders mortgage insurance protects your lender should you default on your home loan. It is usually applied when you have a deposit less than 20% of the property’s purchase price. The final amount of the premium varies depending on the value of the home and the amount you are borrowing. You can avoid this expense by saving a bigger deposit or if your parents are willing to act as guarantors for your loan.

Home and contents insurance

If you are not buying a strata property then you will need to have Building Insurance in place from the time of cooling off. Contents Insurance is a good idea from settlement to cover fixtures, fittings and any belongings you move into the property.

Legal fees and disbursements

There are a handful of unavoidable legal costs when you buy a house. A conveyancer will legally transfer ownership of the property you are buying, while a number of property and title searches are needed to confirm the seller is legally entitled to sell the property, identify any encumbrances or other planning matters. Make sure to factor in council rates and strata fees as part of a budget too, because a seller pays rates up to and until the day of settlement and then it becomes the buyer’s responsibility.

Selling your old home

If you are buying a new home and selling your old one then chances are you’re using a selling agent. You will need to pay a commission on the sale, and possibly some touch-ups or improvements on your home to help you maximise the sale price.

Utilities connection

Don’t forget that before or on moving day you will need to have various utilities like power, gas, and internet connected to your new home. Each of these comes at a cost and can quickly stack up.