The Upfront Costs of Buying a Home
The deposit is only part of it. Budget for stamp duty, LMI, legal fees and inspections too, or you can be caught short right before settlement.
6 min readAustralia-wide
Most first home buyers focus entirely on the deposit, then get a shock when the other upfront costs land. Some are large, like stamp duty, and some are small, but together they can add up to tens of thousands of dollars on top of your deposit. Knowing them in advance means no nasty surprises, and a realistic savings target.
On top of your deposit, budget for stamp duty (often the biggest, though first home buyers may be exempt or discounted), LMI if your deposit is under 20 percent, conveyancing or legal fees, building and pest inspections, loan and government registration fees, and moving and insurance costs. Use the stamp duty calculator to size the big one for your state.
Stamp duty
Stamp duty, also called transfer duty, is a state government tax on property purchases and is usually the largest upfront cost after your deposit. It is calculated on the purchase price and rises steeply as the price goes up. The good news for first home buyers is that most states offer exemptions or concessions up to certain price thresholds, which can save you many thousands.
Because it varies so much by state and price, always check your exact figure. Our stamp duty calculator and stamp duty exemptions guide show what applies to you.
Lenders Mortgage Insurance
If your deposit is less than 20 percent of the property value, most lenders charge Lenders Mortgage Insurance. It protects the lender, not you, if you cannot repay, and on a smaller deposit it can add several thousand dollars or more, often capitalised onto the loan. Ways to avoid or reduce it include a larger deposit, the First Home Guarantee, or a guarantor. See the LMI guide for detail.
Legal and inspection costs
You will need a conveyancer or solicitor to handle the legal transfer, review the contract and manage settlement. Their fee, plus search costs, typically runs into the hundreds to low thousands. For an established home, budget also for a building and pest inspection before you commit, which is money well spent to avoid buying an expensive problem. For an apartment, a strata report serves a similar purpose.
Loan and government fees
Your lender may charge an application, valuation or settlement fee, though these are sometimes waived. Separately, the government charges fees to register the transfer of ownership and to register the mortgage. Individually these are modest, but they belong in your budget.
A useful rule of thumb is to set aside roughly 4 to 5 percent of the purchase price for upfront costs on top of your deposit, then refine it with real figures for your state and situation. First home buyer concessions can reduce this significantly.
The easy-to-forget extras
A few costs sneak up on people. Building insurance is usually required from the day you exchange or settle. You may need to adjust for council rates and water already paid by the seller. Then there are moving costs, connecting utilities, and any immediate repairs or furniture. None are huge alone, but they arrive all at once, so keep a buffer beyond your calculated costs.
Once you know your deposit and costs, sense-check the loan side with the borrowing power and repayment calculators.
Common questions
What are the upfront costs of buying a home besides the deposit?
The main ones are stamp duty, Lenders Mortgage Insurance if your deposit is under 20 percent, conveyancing or legal fees, building and pest inspections, lender and government registration fees, and moving and insurance costs. A rough guide is 4 to 5 percent of the purchase price on top of your deposit.
How much should I budget for upfront costs?
A common rule of thumb is around 4 to 5 percent of the purchase price on top of your deposit, but it varies widely by state and price, mainly because of stamp duty. First home buyer exemptions and concessions can reduce it substantially, so check your exact figures.
Do first home buyers pay stamp duty?
Often not, or at a reduced rate. Most states offer first home buyer stamp duty exemptions or concessions up to certain price thresholds, which can save many thousands. Check the threshold for your state, as it changes the total upfront cost significantly.
Can I add upfront costs to my loan?
Some costs, such as LMI, are commonly capitalised onto the loan, and accessing equity or a guarantor can help with others. However, most cash costs like conveyancing and inspections are paid upfront, so you still need savings beyond your deposit. A broker can help structure this.
Not sure what you’ll need upfront?
A licensed broker can map out every cost for your state and price so nothing catches you out. Free to you.