Upfront Costs of Purchasing Property

Buying a property involves a lot more than just saving up your deposit. There’s a handful of upfront costs that you need to keep in mind to make sure you aren’t caught off guard. Here’s what to expect, using an $800,000 property as an example.

The Initial Deposit

This is usually the largest upfront cost. It typically ranges from 10 to 20% of the purchase price, though this can vary depending on your savings, occupation, or whether you’re using a government scheme. Checking with an experienced mortgage broker helps you figure this out.

Stamp Duty

A state based tax paid to the state revenue office during settlement, usually around 3 to 5% of the property’s value. First home buyers may be eligible for concessions or exemptions depending on their state, so it’s worth checking. On an $800,000 purchase in NSW, this would be approximately $30,873. You can also use a stamp duty calculator.

Lenders Mortgage Insurance (LMI)

A one off premium paid to the bank if your deposit is less than 20%. It protects the lender, not you, against the risk of a smaller deposit. LMI usually ranges from 1 to 5% of the purchase price. Some occupations (doctors, lawyers, accountants and similar) can have this waived even with a smaller deposit, so it’s worth asking an experienced mortgage broker if you qualify.

Legal Fees

Paid to your conveyancer or solicitor for managing the legal transfer of ownership, reviewing the contract and coordinating settlement. This usually costs around $1,5oo to $3,000.

Building and Pest Inspection

Money well spent to make sure the property doesn’t have hidden structural issues or termite damage. Usually costs between $500 and $800.

Upfront Settlement Adjustments

At settlement, you may need to reimburse the seller for costs they’ve already prepaid, like council rates. Budget approximately $1,000, though this number can be higher or lower depending on the seller.

Registration, Transfer and Mortgage Registration Fees

Paid to the bank and/or state revenue office to register the mortgage and transfer of ownership. Usually costs around $600 to $1,500.

Repairs, Maintenance and Renovations

Whether it’s a fresh coat of paint or new carpet, most buyers spend something here in the first few months. Budget at least $2,000 as a starting point.

Depreciation Schedule (Investment Properties)

If you’re buying an investment property, a depreciation schedule lets you claim the declining value of the building and fittings as a tax deduction. Usually costs $600 to $800, and it’s worth speaking to an accountant about whether it’s worth it for your situation or getting a quote from a reliable tax surveyor

Putting It All Together

On an $800,000 property in NSW, with no government concessions and a 20% deposit, here’s roughly what you’re looking at:

  • Deposit: $160,000
  • Stamp Duty: $30,873
  • Legal Fees: $2,000
  • Building and Pest Inspection: $700
  • Upfront Settlement Adjustments: $1,000
  • Registration, Transfer and Mortgage Fees: $900
  • Repairs and Maintenance Budget: $2,000

Total upfront cost required: approximately $197,473

The Bottom Line

It’s easy to focus purely on the deposit and forget about everything else that comes with it. Understanding these upfront costs ahead of time means you won’t get caught out, and you can budget properly before you even start house hunting.