The extra costs of buying your first home

Opinion
09:31 June 27, 2023
By Mr. Oliver Kensington

A deposit is only half the battle when buying a home.

The deposit is always the headliner – as it should be. The median house price in Aussie capital cities is about $860,000. In Sydney, it’s $1,031,138 for a dwelling, and over $1.2 million for a house. A 20% deposit allows you to forego Lenders Mortgage Insurance (LMI) – that puts the median deposit at $172,000. As many young Australians save for a home purchase, here are some costs I’ve recently experienced as a first-time homebuyer. These expenses are not widely publicised but still important to consider as you save for your deposit.

Having a true understanding of your costs means that you won’t face delays in purchasing your first home.

To learn more about the portfolio construction steps, you can listen to our Investing Compass episode.

Despite Mark's reluctance to purchase a home I took a different path. I recently purchased my first home with my husband. These are the costs outside of our deposit.

Stamp duty (or land tax)

Cost: $37,000 - $60,000 on a $1 million dollar property

Stamp duty is a tax charged to transfer properties in Australia. It roughly equates to 4–6% of your purchase price, and varies by state.

Concessions for first home buyers

I purchased in New South Wales, where first home buyers did not pay stamp duty under certain thresholds. I opted for the Land Tax scheme instead, paying $2,464 annually instead of $67,000 up front. This option ended on 30 June 2023.

Conveyancing and property lawyer fees

Cost: $2,750 for 3 contract reviews and finalising settlement

This covers contract reviews, liaising with agents, settlement, and title transfer.

Mortgage Broker

Cost: Free (Broker received a $9,570 commission + $220/month)

Mortgage brokers help find the best rates and features like offset and redraw accounts. We used a commission-based broker and were happy with the result.

Interest rate increases

Cost: Varies

Rates rose twice between pre-approval and settlement. Always budget for a rate buffer to avoid mortgage stress.

Building and Pest Reports

Cost: $450 per onsite inspection

These ensure there are no structural or pest issues. Multiple inspections add up quickly.

Settlement fees, mortgage registration, bank property fees

Cost: $2,600

Often overlooked, these vary by bank and should be included in your budget.

Home insurance

Cost: $850 annually (varies)

Required by lenders at settlement. It covers the structure, not the land.

Buyer’s Agent (optional)

Cost: $33,000 (can range $15,000 - $50,000)

Optional but useful in competitive markets like Sydney. Our agent helped find off-market properties, negotiate, and coordinate professionals.

Repairs and maintenance

Cost: Varies

We faced roof damage, no wardrobes, and a backyard overhaul. Budget for unexpected repairs to avoid post-purchase stress.

Moving costs

Cost: $2,000

Includes end-of-lease cleaning, truck rental, and storage. Timing delays can increase costs.

Furniture

Cost: Varies

Consider furniture needs based on your living situation. Plan this as part of your investment goal.

Final Thoughts

Although we avoided a large stamp duty payment, our additional costs totaled 35% above our deposit. Knowing what lies beyond the deposit helps in planning better for homeownership.