Upfront Costs of Buying a Home Beyond the Deposit

Most first home buyers save for the deposit and stop there. Then, three weeks before settlement, a spreadsheet from their conveyancer shows another 4 to 6 percent of the purchase price in costs they had never budgeted for. On a 600,000 purchase, that is 24,000 to 36,000 that has to come from somewhere, and it usually cannot come from the loan.

I have watched this happen to friends, to clients, and once to myself, when a transfer duty bill arrived that was larger than my car. The upfront costs of buying a home are not hidden, exactly. They are just spread across six or seven different people, each of whom mentions only their own fee. This guide puts them in one place, with rough figures and the order in which they fall due, so you can plan the cash rather than scramble for it.

The Upfront Costs of Buying a Home, at a Glance

Exact figures depend on where you live, the price and the lender, but the categories are remarkably similar almost everywhere. Here is a typical spread for a 600,000 home bought with a 10 percent deposit.

Add moving costs, connection fees for power and internet, and insurance, and the total above the deposit easily reaches 20,000 even where duty is low.

Transfer Duty, the Largest Line After the Deposit

Transfer duty, called stamp duty in many places, is a tax on the purchase. It is usually tiered, so the rate rises with price, and it is often the single biggest surprise. In some regions it is several percent of the price; in others, first home buyers below a set threshold pay nothing at all.

Check three things early. First, look up the official duty calculator for your area and run your target price, plus 10 percent in case the market moves. Second, check whether first home buyer concessions apply to you, because the thresholds are strict and a price just over the line can cost thousands. Third, confirm when it is due. Some places require it at settlement, others within a set number of days afterwards.

Inspections and Reports Before You Commit

A building and pest inspection costs a few hundred and can save tens of thousands. Pay for it even when the home looks new. If you want to know what to focus on in the report, our piece on building inspection items that actually matter walks through the findings worth acting on.

Reports people forget

• A strata or body corporate report for apartments and townhouses, usually 250 to 450, which shows levies, disputes and planned repairs.
• A council or planning search if there is an extension, granny flat or deck that may not have approval.
• A pool compliance certificate where your region requires one.

These are paid before you know if you will buy, so budget for doing them on two or three properties, not just the one you end up with.

Why a Bigger Deposit Is Not Always the Smart Move

The usual advice is to put every spare dollar into the deposit to reduce the loan and, ideally, avoid mortgage insurance. For many buyers that is right. But draining your savings to reach exactly 20 percent can leave you with nothing for duty, fees and the first months of ownership.

Run the numbers both ways. Mortgage insurance on a 90 percent loan might cost 8,000 to 12,000, often added to the loan. Waiting another eighteen months to save the extra deposit means another eighteen months of rent, and possibly a higher price at the end. And arriving at settlement with zero cash means the first broken hot water system goes on a credit card at 20 percent interest. Keeping a buffer of three months of repayments, plus a few thousand for repairs, is often worth more than shaving the loan.

Lender and Loan Costs

Loan fees vary more than anything else on this list. Some lenders charge nothing to apply; others charge an application fee, a valuation fee, a settlement fee and an annual package fee. Ask for the full list in writing when comparing offers, and compare the comparison rate, not only the headline rate.

Also ask what happens if settlement is delayed. Some lenders charge a rebooking fee, and a delay can push you past the date your rental lease ends. If you are asking the right questions of the seller, as in our list of questions worth asking before you make an offer, ask the lender the same kind of plain questions.

Building a Cash Timeline That Works

Costs do not all land on settlement day. They arrive in stages, which matters if your savings are in a term deposit or spread across accounts.

1. During searching: inspections and reports on each serious contender.
2. At the offer or exchange: the deposit, or an initial part of it.
3. During loan approval: application and valuation fees.
4. At settlement: duty, legal fees, registration and any balance of the deposit.
5. In the first month: removalists, connections, insurance and small fixes. Our guide on packing a kitchen so the first night is easy helps keep that first week calm.

Write the dates and amounts in one list and check that money is accessible at each stage. A term deposit that matures a week after settlement is a real and avoidable problem.

Frequently Asked Questions

Can upfront costs be added to the mortgage?

Mortgage insurance often can, and some lenders allow certain fees to be included. Transfer duty and legal fees usually cannot, so plan to pay them from savings.

How much should I keep after settlement?

A common rule is at least three months of loan repayments plus a repair fund of a few thousand. Older homes deserve a larger buffer, since something will need fixing in year one.

Are these costs the same for an investment property?

The categories are the same, but concessions for first home buyers rarely apply, and some regions charge higher duty on investors or foreign buyers.

The Practical Takeaway

Take your target price and add 5 percent for upfront costs, plus a three month buffer, before you start looking. Run the official duty calculator, get every lender fee in writing, and map each payment to a date. Buyers who budget the whole picture can negotiate calmly, because they know exactly how much room they really have.