What are the upfront costs of buying your first home?

7 mins
Updated
October 1, 2024

Buying your first home is a significant milestone, but it’s important to remember that the purchase price is not the only cost. In addition to the property price, you’ll need to budget for several upfront costs that can quickly add up. Let’s take a detailed look at the most common upfront expenses involved in purchasing your first home in Australia.

Stamp duty

Stamp duty is often the largest upfront cost when buying a home. It’s a tax imposed by the state or territory government on property purchases, and the amount you pay depends on your property’s value, location, and the type of property you’re purchasing. However, many states offer concessions or exemptions for first-home buyers, which can significantly reduce this cost.

Concessions and exemptions (as of September 2024):

Each state and territory has different eligibility requirements, so it’s crucial to check the local regulations and consider any additional assistance schemes available.

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Transfer fees

Transfer fees (also known as transfer duty or title transfer fees) are paid to the state government to officially change the ownership of the property to your name. The cost of transfer fees varies by state and property value but generally ranges from several hundred to a few thousand dollars.

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Mortgage registration fees

Mortgage registration fees are charged by the government to register your mortgage on the title of the property. This fee ensures that your lender’s interest in the property is legally recorded, protecting their investment. Mortgage registration fees are typically lower, often ranging from $150 to $200, depending on your location. These fees are essential administrative costs to account for when buying a home.

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Application fees

Most lenders charge a loan application or establishment fee to cover the cost of processing your mortgage. This can range from $200 to $600, though some lenders may waive this fee. Negotiating with your lender or using a mortgage broker may help reduce or eliminate these costs.

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LMI

If you have saved less than a 20% deposit, and are ineligible or weren’t able to receive the First Home Loan Deposit Scheme to utilise a 5% deposit, you will need to pay LMI (Lenders Mortgage Insurance). The cost of LMI varies based on several factors, including:

  • Loan amount: The larger the loan, the higher the LMI premium.
  • Deposit size: The smaller your deposit, the more you will pay for LMI. For example, if you have a 10% deposit, your LMI premium will be higher than if you have a 15% deposit.
  • LVR: LMI is more expensive as the LVR increases. Borrowing 95% of the property's value will incur a higher premium than borrowing 85%.
  • Loan term: Longer-term loans may attract slightly higher premiums.

For a general estimate, LMI can range from 1% to 3% of the loan amount. For instance, on a $500,000 loan with a 90% LVR (meaning you’re borrowing 90% of the property value), LMI might cost between $5,000 and $15,000, depending on the lender and specific loan terms. It’s also worth noting that LMI is usually a one-off premium, but the cost can be significant, especially for large loans. You can opt to pay for this upfront or to spread it over the lifetime of the loan, increasing the overall principal.

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Conveyancer or solicitor fees

A conveyancer or solicitor helps ensure that all legal processes associated with transferring property ownership are correctly handled, protecting you from legal pitfalls and ensuring that the transaction proceeds smoothly by completing the following tasks:

  • Reviewing the contract of sale
  • Perform a title search to ensure everything is in order to transfer 
  • Act as the main point of contact between you, the seller, banks, and government authorities
  • Ensure your purchase complies will all state and local laws
  • Facilitate settlement

Conveyancers’ or solicitors’ fees typically range between $800 and $2,500, depending on the complexity of the transaction and the property’s location. If the sale is straightforward, the fees may be on the lower end, but more complicated transactions—such as those involving off-the-plan properties, strata titles, or disputes—can push costs higher. Solicitors often charge higher rates than conveyancers due to their broader qualifications and ability to handle more complex legal matters.

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Building and pest inspection

A building and pest inspection is essential to ensure your property is in good condition and free of major structural damage or infestations. These inspections generally cost between $400 and $1,000, but they are well worth the investment to avoid unexpected issues later.

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Body corporate

When purchasing a property within a strata-titled development, such as an apartment, townhouse, or unit, you will become part of a body corporate (also known as an owners' corporation). The body corporate is responsible for managing the common areas of the property, including gardens, hallways, pools, gyms, and other shared facilities. To cover the maintenance, repairs, and insurance of these areas, owners are required to pay body corporate fees.

The cost of body corporate fees can vary significantly depending on the size, age, and amenities of the property. Basic complexes may have fees ranging from $1,000 to $3,000 annually, while high-end properties with extensive facilities could see fees upwards of $10,000 per year.

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Home and contents insurance

Lenders typically require that you take out building insurance before settlement to protect the property against damage. The cost of home insurance depends on several factors, such as the location, size, and value of the home. On average, expect to pay around $1,000 annually for comprehensive home insurance.

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Understanding the upfront costs of buying a home will allow you to plan your budget effectively. From stamp duty to insurance, each of these expenses can significantly impact your overall financial situation. Be sure to consult with your mortgage broker or financial advisor to get a full picture of what to expect.

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Disclaimer
Prepared by Beck McLean Finance Pty Ltd ABN 80 632 809 833. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.
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