The Hidden Costs of Purchasing a Property
You’ve found the perfect property, saved a 5% deposit, been granted conditional approval for a home loan to cover the other 95% of the purchase price, and you’re ready to buy. But have you considered some of the other costs involved in a property purchase?
Unfortunately, when it comes to purchasing a property, there are additional costs that you may not have accounted for in the initial decision to buy. The majority of these are unavoidable but some can vary, and it pays to do your homework in advance so you don’t get caught out.
Whilst Stamp Duty is by far the largest expense, and one that most purchasers are painfully aware of, there are a couple of other government fees and charges that you will also need to pay.
The Property Transfer fee is a state government charge to register your name on the title of the property. Some states and territories may charge a set fee, while others are on a sliding scale. There is also a Mortgage Registration fee which is a state government charge for registering your mortgage against the title of the Property.
As of 1 July 2022, the registration fee for each document is $154.20 (incl. GST). This fee will be updated at the beginning of each financial year.
All property settlements are now required to take place on an e-Conveyancing platform known as PEXA. Therefore, to use this platform, you will also need to pay a PEXA fee on settlement.
As of 1 July 2022, the cost of a PEXA settlement is $123.97. This fee will be updated at the beginning of each financial year.
Costs Associated with Financing the Purchase
Many purchasers mistakenly assume that they only have to pay 5% deposit on a property, as their bank is financing the other 95% of the purchase price. Some Vendors, in fact, require a 10% deposit and a request for a 5% deposit needs to be negotiated with the Vendor. In instances when this cannot be negotiated, you may find that you need to purchase a Deposit Bond for 10% of the purchase price, or source the additional money elsewhere (which can be paid back at settlement when the finance is released).
The majority of financial institutions will also charge a loan application fee and, if you are borrowing more than 80% of the property’s purchase price, you will also have to purchase Lenders’ Mortgage Insurance (LMI) which protects the lender in the event that you are unable to meet the mortgage repayments. If you are buying a house, you may also need to take out your own Property/Building insurance on the property (on top of the LMI) before your bank or financial institution will finalise the loan.
Purchasing a property is probably one of the most important decisions you will make. Having a trustworthy and reliable solicitor or conveyancer to manage the process on your behalf is a sound investment. Their professional fee covers the cost for them to conduct all of the relevant searches and legal procedures, as well as organising settlement on your behalf.
In addition, you may also want to purchase a Building and Pest Report (for houses) to ensure that you are happy with the condition of the property, or a Strata Report (for apartments/units) to review the financial records of the building and to see whether there are any major upcoming works. These reports can be arranged by your solicitor/conveyancer and the cost of these reports is between $300 to $1,000 – a relatively small price to pay for peace of mind!
Speak to CDQ for Advice
If you are looking to purchase a property, feel free to speak to one of the experienced conveyancing team at CDQ on (02) 8556 2400. Our licensed conveyancer or property lawyer will be able to advise you regarding the potential costs involved in your purchase, guide you through the transaction, and ensure that there are no hidden surprises!Back