Anyone who wants to purchase an Australian property must sign a contract of sale document, which outlines an agreement between a buyer and seller. Legal documents can feel overwhelming, especially if you’ve not had to sign one before.

If you’ve recently been faced with a contract of sale but need help figuring out where to start, you’ve come to the right place. Here’s everything you need to know to understand this type of contract.

Key Takeaways:

• A contract of sale is a legally binding agreement between the seller and buyer of a residential property.
• A licensed conveyancer or solicitor will issue a contract of sale.
• Buyers have a cooling-off period of three days to decide whether they still want to buy a property after the contract is signed.

What is a contract of sale?

A contract of sale is a legal document that outlines an agreement between the seller of a property and the buyer, designed to protect the rights of both parties. The contract will specify the terms of the agreement and should be carefully consulted before signing.

What will a contract of sale include?

Legally, a contract of sale needs to include the following details, such as

1. 1. The names of the buyer and seller
   2. The permanent addresses of both the buyer and seller
   3. The address of the purchased property and any land titles
   4. The agreed purchase price
   5. The proposed deposit amount and date it’s due
   6. The property settlement date
   7. Information regarding an independent property valuation,
   8. Other details such as inclusions of fittings like carpets or appliances and a relevant occupation certificate if the home includes a swimming or spa pool.

After the contract is signed, you can’t turn back the clock, so it’s essential to read over the document fully to avoid any serious mistakes. Consider consulting a real estate agent or solicitor to help you through this process.

Do I have to pay goods and services tax on a property?

No, if you’re purchasing an established residential property like a house or apartment, you don’t need to pay goods or services (GST) tax unless the seller is registered for GST.
This will not be included in your contract of sale.

Can you alter the purchase price after a contract of sale is signed?

No, you cannot change the property price after signing the contract of sale.

By signing the document, you have effectively sold or bought the property, and no more amendments to the sale price can be made.

If you’ve made a mistake or need more help in understanding your contract of sale, seek independent legal advice.

Is a contract of sale a legally binding agreement?

A contract of sale is a legally binding document, so a signed contract is subject to the law. You’re therefore protected by law if the contract of sale terms are not met.

Do I need a real estate agent to create a contract of sale?

No, rather than a real estate agent, you will need to consult with a licensed conveyancer or solicitor to draw up a contract of sale. If you’re buying a house, the seller will likely issue you the contract.

If you’re selling a house, find a trusted solicitor by consulting your real estate agent or mortgage broker, as they may know one within their network.

Is there a cooling-off period?

Sellers are entitled to a cooling off period of three business days for private sales of residential properties.

The cooling-off period is designed to give the buyer a chance to consider the offer put forward by the seller and begins from the date the buyer, rather than the seller, signs the contract.

If the buyer decides they no longer want to buy the property during the cooling-off period, they will need to give notice to the seller via the seller’s agent.

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Learn more about how we can help you by chatting with one of our friendly team members today. Alternatively, ask us a question online.

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FAQs

What are the three stages of a contract of sale?

Legally, the three stages of a property sales contract are:

1. Preparation of the document: the negotiation period, which ends the moment both parties agree
2. Contract birth: when both parties agree to the contract terms
3. Consummation: the fulfilment of the terms in the contract

Can I back out of a property sale?

As a buyer, you have a cooling-off period of three days to decide whether you want to go ahead with the purchase of a property. After this time, you’re legally bound to purchase since you’ve signed the sales contract.

Who prepares a contract for sale?

A licensed solicitor or conveyancer will prepare a sales contract for a property and issue this to both the buyer and the seller after negotiations have taken place.

How to amend the title to a property?

Contact the Australian land titles office in the state or territory of the purchased property to legally change ownership.

The post How to Understand the Contract of Sale When Purchasing a Property in Australia appeared first on Lendstreet.

But how do you avoid making crucial mistakes and make sure you get the most out of your property investment? Buying interstate is intimidating but might offer golden opportunities. Stay tuned to discover the pros and cons of investing in interstate property.

Pros of buying property interstate

Buying property interstate is riskier than purchasing an investment property just next door. After all, you can’t regularly check on your investment if you’re a ten-hour drive away – or more. However, there are some positives to interstate property investments.

Affordable property

As we mentioned, property prices in Sydney are reaching massive levels. Historical prices have increased 300 – 400%, making it nearly impossible for all but wealthy individuals to invest in Sydney. Accordingly, many investors are turning to alternative cities across Australia. Perth and Brisbane have far more affordable properties with a solid rental yield for investors.

Investing interstate enables Aussies to purchase rental property without breaking the bank. Each state’s property market differs. However, if you do your homework, you can find an interstate property with strong rental yields and high capital growth drivers.

Tax benefits

All states have different tax rules and regulations. For example, each state has different stamp duty and land tax rates. Some even offer stamp duty concessions on some property types. In Sydney, the stamp duty tax rates are

1. $0 to $14,000 – 1.25%
2. $14,000 to $32,000 – $175 plus 1.5%
3. $32,000 to $85,000 – $144 plus 1.75%
4. $85,000 to $319,000 – $1,372 plus 3.5%

In comparison, in Queensland, investors only pay stamp duty on any sum of about $5,000.

Furthermore, buying interstate offers other income tax relief. In New South Wales, property investors pay tax on the cumulative value of their properties. If you spread your investments across different states, you’ll spread your property tax payments and remain on a lower threshold.

Diverse property portfolio

Buying property across states will help diversify your investments. If you only have a property in NSW, all your assets would suffer if the property market were to plummet. However, if you have an interstate investment, your other investment should stay safe if one area were to decline.

Generally speaking, demand determines property prices. As more and more people wish to buy in a specific area, property market prices increase. However, the opposite is also true. A property market might fall if demand drops. A diverse investment portfolio should protect your properties as much as possible.

Cons of buying property interstate

Buying interstate property investment isn’t as easy as snapping up a house in the same neighbourhood as you live in. Let’s look at the downsides of investing interstate.

Different regulations

Just as states have different tax rules, they also have other local laws you may not be familiar with. If you’re buying a property interstate, you’ll need to know different regulations. This means you’ll need to understand the rules and customs surrounding owning a property interstate and the laws of home loans.

For example

1. Do you need home loan pre-approval before making an offer on the house?
2. What is your solicitor allowed to do? Can they review the contract before you sign it?
3. What is the cooling-off period in the state?
4. What is the auction procedure?
5. Who draws up the sale contract?
6. When do you apply for finance? Are there any grants you’re eligible for?

Long-distance management

Not only does distance make buying interstate property more challenging, but it also makes it hard to manage your new investment. Consider the costs of flights and accommodation. How much do they add to the property purchase price? Plus, you’ll need to think about hiring a property manager to maintain the rental property while you’re away.

Is your interstate investment saving you that much money by the time you tot it all up?

Thoroughly research the market before buying a property in the area. Are the rental yields high enough to cover the additional costs of property managers and other long-distance expenses?

Unfamiliarity with the property market

Unlike your home state, you probably know very little about interstate property markets. If you’re buying in another area, you need to research the new market well.

Questions that may seem straightforward in New South Wales could have different answers elsewhere. For instance, is a house or an apartment a better deal? Just because houses are the preference in your local area, it doesn’t mean the same for tenants in your investment neighbourhood.

Speak to a local buyer’s agent in the area to better understand the market.

7 tips for buying property interstate

While it’s tempting to focus on your own backyard, you can make a good investment by crossing state borders. Follow our tips to avoid hidden mistakes and become a successful borderless investor.

1. Determine your budget

As with any investment, you should determine your budget before starting anything else. Assess how much you can afford to spend on an investment property. If you have equity on another home, you can use this instead of a cash deposit on your new property. Generally speaking, lenders in all states prefer 20% deposits to avoid Lenders Mortgage Insurance.

Once you have an idea of the amount you’re willing to spend, think about which market you’d like to invest in. One advantage of investing interstate is that you can get a good idea of the right price for a home without an unbiased opinion. You may not see your own home or neighbourhood with the same objectivity.

2. Have a long-term strategy

Whether buying property or investing in shares, all investments should have a long-term strategy. Buying a property with the hope of making strong returns isn’t likely to improve your financial situation. Property investment is not a one-off event. You need to manage your investments over a long period. Therefore, it needs to fit with your other financial circumstances.

Moreover, think about the long-term behaviour of the area you’re investing in. For example, are there any development plans that could affect your real estate purchase? Population growth might drive demand up. However, demographic trends can also harm capital growth. Are there any other growth drivers, such as employment opportunities or government charges?

3. Do your homework

You need to do your due diligence and research the property area thoroughly. Beyond past prices and future plans, consider whether it’s a good investment in the present. While the latter is vital for long term growth, you also want to make short term returns.

Are there plenty of amenities and public transport links nearby? Is it an attractive place to live for tenants?

Speak to other investors in the area. Can you piece together a picture of the realities of an investment property in the area?

4. Beware of costs variations

As we mentioned, stamp duty, land tax, title transfer fees and other charges vary across Australia. You must budget these expenses before committing to a particular area. Additionally, consider the local prices of a buyer’s agent, property manager, mortgage broker, and home loan fees?

A solicitor should have an accurate idea of most of the legal and property-related expenses you’ll face. Moreover, mortgage brokers are typically paid a commission by the lender – therefore, they offer free services to homebuyers and investors.

5. Visit the area

Ideally, you want to visit the area you’re buying in. There are few substitutes for walking through the neighbourhood and speaking to the people who actually live there. Line your trip up with several open houses and attend as many as you can.

The process of buying is different in every state. Get a feel for how fast-paced the transaction is and whether there is room to negotiate.

Alternatively, if it’s not possible to visit every property firsthand, get a buyer’s agent to do the job for you. They’ll provide you with expert knowledge and local insights.

6. Assemble your team

To buy a property interstate, you will need a team of experts at your side.

1. Solicitor or conveyancer – Legal requirements differ from state to state. A local conveyancer will inform you of any regulations, provide tax advice, and ensure you abide by them.
2. Property manager – Speak to a property manager about the property’s condition. As they’ll be the ones managing it from day to day, they’ll tell you upfront if there are any concerns.
3. Experienced mortgage broker – Speak to a trusted home loan broker with an Australian Credit Licence about getting pre-approval.

7. Speak to a mortgage expert

Getting pre-approved before visiting your interstate investment will highlight you as a serious customer. In a new, unfamiliar area, you will have a set budget that can help you start negotiations with the vendor. A broker can also help you navigate lending policies and investment loans, ensuring you maximise your borrowing power.

Where should I buy: Property Prices Across Australia

Property prices vary incredibly across Australia. Here are the average asking house prices in each state, according to SQM Research.

1. Sydney, New South Wales: $1,746,303
2. Melbourne, Victoria: $1,1,63,800
3. Adelaide, South Australia: $683,869
4. Brisbane, Queensland: $894,876
5. Perth, Western Australia: $741,675
6. Hobart, Tasmania: $685,121
7. Canberra, ACT: $1,097,831
8. Darwin, Northern Territory: $653,064

With Sydney prices nearing 2 million, it’s no wonder NSW investors are heading interstate.

Key Takeaways

Buying property interstate is mainly similar to purchasing an investment in NSW. However, here are the key takeaways.

1. Property prices across Australia are far lower than in Sydney.
2. Watch out for differences in regulations, taxes, and customs.
3. You’ll need a property manager to look after the investment.
4. You’ll need a team of experts by your side, including a buyer’s agent, solicitor, and mortgage broker.

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FAQs

Can you buy a house in another state without a job there?

You don’t need to live or work in a state to buy property there. It’s as easy as finding a local lender with a licence in that state. Just remember there might be differences in laws and customs. Speak to a local buyer’s agent to help you find the right property.

Can a second home be considered a primary residence?

No, for tax purposes, you can only have one primary residence. If you live in a property for more than 12 months, it’s considered your main residence and exempt from Capital Gains Tax. However, it’s subject to CGT if you own and sell a second investment property.

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What is a second home?

A second property is essentially what it says on the tin. If you already own your first property, purchasing another would be a second home. Generally speaking, most Australians rent out their second property to tenants. However, a second property could also be a holiday home, secondary residence, retirement property, or a home for a family member.

Unless you’re in a very financially strong position, you’ll likely want a return on your new property investment. Typically, rental income will offer short term cash flow. In the long term, selling your property for capital gains will make your investment worthwhile. Let’s look at what you should consider before purchasing a second home.

1. Why are you buying a second property?

Your first consideration should be your personal objectives. Why are you buying a second home? The first time around, you wanted a house to call your own. Now that dream is fulfilled, why do you want another property?

Understanding your goals will help you decide what kind of property you should buy. A holiday home, for example, will be very different from a rental property. Additionally, purchasing a second residence for yourself or your family will differ from a retirement property.

If the goal is to make a profit, you’ll have to look at areas with high capital growth and in high demand by renters. Whereas, if purchasing for yourself, you can make more personal decisions about your preferences.

2. How much deposit is needed for a second home?

Just as when you purchased your first investment property or home, you’ll need to put down a deposit. No matter how many properties you own, most lenders require a 20% deposit to avoid Lenders Mortgage Insurance. Fortunately, if you already own one home, you can leverage the equity in your home as a deposit.

How does equity work when buying a second home? Well, if you have paid off a certain amount on your existing property home loan, you’ll own a portion of the property – called equity. You can use the equity in your home as security for your new property. Even if you don’t have enough equity in your home, you can combine it with a cash deposit to avoid paying Lenders Mortgage Insurance.

To calculate your home equity, subtract the remaining home loan balance from the property value.

3. Is a second home a good investment?

Purchasing another property could be an excellent investment with significant returns. However, it could also be a risky venture that results in a loss. The key is to prepare yourself.

Take stock of your financial situation. Is it the best time to diversify your property portfolio? If you cannot afford to take on additional home loan repayments on an investment loan, it’s probably not the right time. Two mortgages is a significant financial commitment.

A successful property investment starts with finding the right property at the right price. Speak to a local real estate agent about the property market before taking on a second home loan.

4. Can I get a home loan for a second property?

Yes, theoretically, you can get two mortgages at once. However, this depends on your circumstances and financial situation. Before you even begin house hunting, you should speak to a Sydney home loan broker or calculate your borrowing power to see which home loans are available.

There are several different investment loan structures. Determining the right loan depends on your investment strategy. Seek professional advice about which home loan option best suits you and decide whether or not you meet their lending criteria.

Moreover, check out your new home loan’s interest and comparison rate to ensure investing in property is a smart financial decision.

5. What are the extra costs of a second house?

Whether it’s your first property or second, buying a home means additional fees. Here are the potential costs involved with your second property.

1. Property management fees
2. Mortgage repayments
3. Maintenance costs
4. Council rates
5. Insurance

Other costs might also appear – such as tenant advertising costs. Your expected rental income and tax deductions should alleviate some financial burdens. However, ensure you create a detailed budget of your expected expenses and income to make the most cost savings.

Additionally, consider the cost of your home loan. Can you save money by avoiding redraw fees or improving your borrowing power? Or negotiate lower interest rates?

6. Where should I buy an investment property?

If you’re buying a second property to rent out to good tenants, deciding the location of your new home should be one of your top priorities. Remember to keep your personal preferences out of the decision. Your dream home isn’t necessarily the same as someone else’s. An investment property should be in an area with good public transport links and other amenities.

To avoid high vacancy rates, determine what kind of tenant you wish to attract – e.g. families, sole occupants, students. Then, focus your search on the needs of that particular tenant.

However, you also need to consider your capital gains beyond rental returns. Is the property in a high growth area? Look at other recent sales in the area. What are the chances your property increases in value?

7. What kind of property should I buy?

Similar to location, the kind of property you purchase is essential. For example, apartments and units have lower rental returns and are cheaper. On the other hand, house values are more likely to increase as land appreciates more than buildings. That said, land in a more affordable area isn’t necessarily a better deal than a high-demand location apartment.

8. What type of mortgage should I get?

Speak to a mortgage broker about which kind of home loan will suit you. Most property investors have higher borrowing power than first-time owner-occupier buyers. Therefore, you can negotiate your home loan to get the best deal.

Consider whether you want a variable or fixed-rate home loan repayments. Or whether you’d prefer a principal and interest loan or an interest-only home loan. Plus, many additional features, such as an offset account or redraw facility, will help you save money on your mortgage repayments.

Also, think about other fees involved. A mortgage broker might negotiate fee waivers, such as early repayment fees. Look at comparison rates to determine additional costs associated with the loan.

9. How can I get a good deal on a property?

Before you make an offer on a property, you should establish its actual value. While it’s true that a property is worth whatever the highest biller is willing to pay, you don’t want to spend more than you have to. You can hire a professional to value your property or estimate the value yourself by looking at the local property market.

Remember, the lender will also complete a property valuation. If your offer to the vendor is higher than what the bank deems the property’s worth, they might not lend you the entire loan amount. If you haven’t got a subject to finance clause in your sale contract, you may have to make up the shortfall.

10. What is the rental potential of my second home?

If your primary purpose for buying an investment property is to earn a capital gain, you’ll want to know whether you will get a good rental return. If the house is currently rented out, this should give you a solid idea of your rental income. Alternatively, you could ask a real estate agent for their opinion on the property’s rental returns.

Don’t forget that you will need to pay property maintenance and management fees and repay your home loan.

11. What capital growth value is there?

To make a substantial capital gain, try to purchase a property in a high capital growth suburb. You should also think about how else you can add value to the investment property. Is there room for renovations or adding another bedroom to improve rental income and long term capital gains?

12. How do I manage the property?

You should decide whether you will personally oversee the management of the investment property or hire a third party to do so. This decision is for all property investors, whether you plan to use your second house for yourself or rent it out.

As a general rule, you should expect to pay a property management company between 5 – 10% of the weekly rental income.

13. What tax will I need to pay on a second home?

Firstly, if you’re renting your investment property, you will need to pay income tax on your earnings. You can deduct property-related expenses from your total taxable income. The total income tax you pay depends on your tax bracket.

Additionally, you may have to pay capital gains tax when you sell the house. Australians receive the main residence CGT exemption on homes they’ve lived in for 12 months or more. Unfortunately, this doesn’t apply to second homes. As a result, you’ll need to pay capital gains tax when you sell your investment property.

14. What if I make a loss?

As with all investments, it’s vital to determine your plan of action should you make a loss. Fortunately, in Australia, property investors can negatively gear rental homes. This means you can deduce your loss from your taxable income.

Bottom Line

Purchasing a second home is a risky and rewarding venture. As long as you research your prospective second house and create a plan should things go wrong, your investment should result in long term returns. Make sure you get the best home loan for your investment.

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FAQs

How much deposit do I need to buy a second home?

To avoid paying LMI, you’ll need a 20% deposit to purchase a home. If you already own a property, you can use the home equity as additional security on your new purchase, reducing the cash deposit requirements.

Is it good to buy a second home?

Second homes are great investment opportunities for many. However, they also come with high costs and high risks. Research your local property market and speak to a mortgage broker to determine if it’s the right decision for you.

What is considered an investment property?

Investment properties are land or buildings held for rental returns or capital gains appreciation. It could be residential, commercial, or a holiday home. Investment properties are liable for additional taxes and costs.

What is the 1% rule for an investment property?

The 1% rule means that the price of the investment property should be no more than 1% of the rental income. However, the 1% rule isn’t a guarantee of investment success or failure as it prioritises cash flow over long-term investment.

What percent deposit do you need for an investment property?

Ideally,  you need a 20% deposit to purchase a property. However, if you are buying a second home, you can use the home equity from your first property as a deposit.

Article image – Home loan photo created by jcomp – www.freepik.com

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The post 14 Things to Consider When Buying a Second Home appeared first on Lendstreet.

Property purchases can cost tens of thousands of dollars. Therefore, it’s vital that you, as a buyer, understand the actual price of buying property. Moreover, there are plenty of hidden costs. Have you thought about pest inspection fees and conveyancing fees, for example? Or, how much does the home loan really cost?

Whether you’re a first home buyer purchasing your new home or already an owner-occupier moving on to the next property, moving home is expensive. You need to budget for far more than a deposit. Follow our guide to discover all of the costs of buying a house. From upfront costs to ongoing and hidden fees, we’ll unpack it all.

Conveyancing and Legal Fees

Conveyancing and legal fees are some of the first expenses you’ll need to pay when buying or selling a house. Essentially, these costs are delivered to your solicitor to complete the legal paperwork. This will include drawing up the contract of sale, exchanging the contract, and completion. They will typically complete other legal documents associated with the buying process.

Engaging a good solicitor can help you speed up the process, enabling a swift and safe sale. While technically you don’t need a legal professional, it’s highly recommended. Apart from anything, a solicitor can help you avoid costly mistakes. It’s worth shelling out the money for a good solicitor.

Most conveyancing fees are somewhat standardised. Additionally, you can often pay a fixed price for their services. However, make sure you know what is and isn’t included with the fixed fee. Any additional service might come at extra costs.

Legal fees depend on the complexity of the transaction.

Estimated Cost of Conveyancing:

Between $1,000 – $3,000, depending on the job required and whether you opt for a team or a private solicitor.

Stamp Duty

Stamp duty is a government tax based on the transference of certain legal documents, usually land and assets. When you purchase a house, the property title transfers to you. Thus, you have to pay stamp duty.

Stamp duty is costly. It can cost tens of thousands of dollars. The precise amount that you pay will depend on your property, its value, territory, and if you’re a first home buyer. Whether it’s an established home, a newly built home or vacant land also impacts how much stamp duty you pay.

The more costly the home, the more stamp duty you pay.

However, some states offer exemptions to first home buyers. For example, on a $650,000 house, first home buyers don’t have to pay stamp duty in New South Wales. Properties between $650,001 and $850,000 come with a partial concession.

For non first home buyers, stamp duty costs $1.25 for every $100 up until $14,000. Up until $32,000, it’s $175 plus $1.50 for every $100 over $14,000. And so on.

Estimated Cost of Stamp Duty:

The current average house price in Sydney is $1,106,279. The stamp duty will cost $45,721.

Pest and Building Inspections

Before purchasing a house, you must hire a qualified inspector to conduct a pest and building inspection. The building inspection report will detail the property’s condition.

A home inspection differs from a valuation. The mortgage lender will complete the property valuation to ensure that the house is worth the loan amount. You don’t need to pay for this.

A building and pest inspection cover everything, including faulty roofs, rising damp, cracked walls, and more. It will usually also include details on whether you can repair the faults and their cost. A building inspection doesn’t have to include a pest inspection, but it’s sensible to check for termites and other pests. Inspecting for pests often comes at an additional cost.

Estimated Cost of Pest and Building Inspections:

Pest and building inspection costs vary depending on where you live. Those in more central city areas usually charge more. You’ll typically expect to spend $200 – $500.

Mortgage Registration and Transfer Fees

When buying a house, most of us need to apply for a loan. Beyond the house deposit and mortgage repayments, you will also need to pay for the home loan’s admin. Fortunately, finding your home loan is free. The lender will pay your Sydney financial broker a commission.

However, there are other costs to consider.

A mortgage registration fee formally registers the mortgage. Essentially, it records the property as security against the home loan. If, for any reason, you cannot make your mortgage repayments, the lender has legal access to your property. A transfer fee is the price to transfer the property ownership to you, the new owner.

You pay a mortgage registration fee when the mortgage is established or paid out towards your property. Your conveyancer will organise the mortgage registration fee along during the settlement period with other costs, like stamp duty.

Estimated Cost of Mortgage Registration and Transfer Fees

Mortgage registration and transfer fees change year on year. As of January 2022, they each cost $147.70 in New South Wales. It’s a reasonably minimal sum compared to other expenses, yet worth factoring in.

Loan Application or Establishment Fees

A loan application fee covers the costs of setting up a mortgage with a lender. The exact amount depends on the lender, the size of the loan, and other aspects. It might either be a fixed fee or a percentage of the loan amount. Many lenders might waive the loan application fee or offer a discount if you’re using a mortgage broker.

Mortgage brokers have a panel of lenders they work with. If you secure a loan through one of their lenders, you may receive other discounts, such as lower interest rates and other waived ongoing costs.

Estimated Cost of Loan Application:

Generally speaking, you can expect to pay between $300 – $600, although some might cost upwards of $1,000.

Lenders’ Mortgage Insurance (LMI)

Homebuyers have to save up a deposit to secure home loans. However, as a first home buyer, you’re likely to have a smaller deposit.

One of the primary considerations lenders take when analysing your financial situation before offering pre-approval is the loan to value ratio. The LVR is a percentage that expresses how much of the house purchase is funded by the loan. Most lenders prefer home buyers to have a loan to value ratio of no more than 80% – requiring a 20% deposit.

However, many lenders will still offer a loan to those with a higher LVR. In this instance, they require you to take out Lenders’ Mortgage Insurance. LMI is a hefty sum, paid upfront. However, most lenders will allow you to roll it into the mortgage. There are two leading Lenders’ Mortgage Insurance providers in Australia, Genworth Financial and QBE LMI.

LMI depends on the type of loan you’re getting, the lender you have chosen, the size of your deposit, and various other aspects.

Estimated Cost of LMI:

There is no exact amount for mortgage insurance as it depends on so many factors. However, for a $500,000 property, with only a 10% deposit, the estimated LMI would be about $12,000. Although, if you finance the LMI with your home loan, you won’t need to pay anything upfront. Instead, your monthly repayments will be higher.

Council and Water Rates

Council and water rates are ongoing costs to consider when buying a house. The seller should have paid any owed money until the end of the quarter – or at least until you take ownership of the house.

Council rates are decided by the local council, differing from suburb to suburb, and state to state. It usually depends on the value of the land.

Water, unlike most utilities, isn’t cut off when the house is sold. The seller should have paid up until the settlement date as with the council rate. Someone will read the water metre to confirm the amount as part of the settlement.

Estimated Cost of Council and Water Rates:

Council rates for those living in the City of Sydney – arguably the more expensive suburb – cost around $708.40. The water rates also depend on where you live. Here are the current water charges.

Sydney Water Service:

1. Charge with a metre: $24.30
2. Charge without a metre: $119.77

Insurance

Home and contents insurance is an ongoing cost of buying a house. Home insurance, also called property or building insurance, covers the main house, garage, other outbuildings, and permanently attached fixtures. It might require that all buildings covered can be locked.

Contents insurance covers everything inside the home that you cannot permanently fix to the walls, ceiling, or floor. For example, this might include furniture, TVs, and fridges. Home and contents insurance protects your assets against most dangers, such as fires, storms, or flood damage.

It’s possible to have two separate policies or as combined insurance.

Estimated Cost of Insurance:

Home insurance costs depend on the sum insured and the risk of claiming. For example, the insurer might look at the number of people in the house, the average age, the location, the surrounding crime rate, and the risk of flooding. Considering the number of variables, insurance costs vary greatly.

Comparison website finder.com.au suggests that the average policy to cover a house worth $500,000 and $100,000 content value would cost $144.13 a month in NSW.

Moving

Moving into your new home is an exciting prospect. However, the expenses go way beyond the purchase price. Packing up your possessions takes time. You have to pay a removal firm. Buy new furniture.

This expense depends on many variating factors. Where is the move to and from? How much needs to be moved? And so on. Most removalists charge at an hourly rate. Although, if you’re moving between states, they might charge differently.

Although the cost of hiring a removal firm might sound meaty, it’s worth the price for a smooth transition from the old home to the new home.

Of course, you might find it more worthwhile to hire or borrow a van and make the move yourself. This is especially true of smaller dwellings with fewer possessions. The good thing about removalists is that they will pack, load, unload, and reassemble your assets, taking the stress out of moving day.

Estimated Cost of Moving:

You should expect to pay between $75 to $300 an hour—double-check whether the quote includes packing materials or insurance. Interstate removal could cost upwards of $3,000.

Most removal firms will have calculators on their websites so you can determine more precisely how much you’ll spend. Let’s say you have a three-bedroom house. This would cost around $200 an hour for three movers, taking six to eight hours. The total price would be between $1,200 – 1,600.

Investment Property Costs

The costs of buying an investment property are much the same as a residential home. However, there are extra costs to consider.

These might include

1. Leasing fees
2. Property management fees
3. Advertisement costs
4. Repairs and maintenance
5. Body corporate fees
6. Tax
7. Investment loan, interest, and bank charges

Estimated Cost of Property Costs:

The costs of running an investment property vary depending on many factors. Many Australians take advantage of negative gearing for their investment property.

Example Costs of Buying a House in New South Wales

Let’s say you’re a first home buyer looking at a small three-bedroom house in Sydney. With a 20% deposit on a property with a purchase price of $700,000, you won’t need to pay Lenders’ Mortgage Insurance. The loan is a variable one with a 30-year term.

Upfront costs of buying a house

1. Deposit: $140,000
2. Conveyancing fees: $1,200
3. Stamp duty: $10,435
4. Pest and building inspection: $250
5. Loan application fee: $400
6. Mortgage registration fee: $147.70
7. Transfer fee: $147.70
8. Moving house: $1,400

Ongoing costs of buying a house

1. Loan repayments: $2,098 per month (for 30 years)
2. Council and water rates: $710
3. Insurance: $144.13 per month

This is just an estimate. The actual cost may differ significantly. Indeed, there are likely further hidden costs throughout the process of buying a property.

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Key Takeaways

The purchase price is not the only expense you need to budget for. While saving up for a deposit is crucial, remember that you will spend a significant sum of your money on hidden costs. Stamp duty, legal fees, and moving house are expensive to pay out. Of course, first home buyers may be exempt from stamp duty.

Remember to budget the costs of moving out carefully – you’ll likely spend more than you expect throughout the process.

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