Budgeting for the total costs of buying a home

When considering how much you can afford to spend on your new home, it's good to be aware of all associated costs.

You'll need to factor in stamp duty, legal costs, searches and inspections, council rates – and you also may need to pay for Lender's Mortgage Insurance, building insurance, or Body Corporate fees (including sinking funds and liability insurance).

Stamp duty

Stamp duty is a State Government tax that varies by State and Territory. There are two types of stamp duty which may be payable:

• On the mortgage – stamp duty depends on how much you borrow, and the purpose of your loan
• On the property – stamp duty depends upon the price of the property.

Use our handy Stamp Duty Calculator to determine how much stamp duty you may be required to pay. Your state Stamp Duty office can provide you with information on how much stamp duty you have to pay, how it is calculated and if you are entitled to a rebate, exemption or deferred payment.

Your legal costs

Many of the costs associated with buying a property are non-negotiable. Your main legal cost will be for conveyancing, which is the transfer of property from one person to another. Conveyancing fees vary depending on where you are and where you are buying.

Ask your solicitor/conveyancer/settlement agent to give you an estimate of legal costs. See a list of Conveyancers in your state.

Searches and inspections

You should not exchange contracts to purchase a property until you have had all the necessary searches and inspections done. If a "cooling off" period applies to your contract, you may be able to have the inspections and searches completed between the exchange of contracts and the end of the "cooling off" period.

Your solicitor/conveyancer/settlement agent should advise you about the searches and inspections you need. These may include:

• Building inspections - the written report should detail any flaws, including problems with damp and the structure of the building and roof.
• Structural inspections - this visual inspection examines the existing condition of the property's foundation, bearing walls, beams and columns, floor, framing, crawlspace areas, and drainage. These areas are checked for deterioration and damage and then recommendations for repair may be made.
• Pest reports - this report should detail any evidence of past or current pest infestation in the property, such as ants and, if required, any recommended treatment.
• Surveys - check the position of the house and its boundaries, and confirm that the house is built on the correct block, and if it has been built in accordance with local council requirements.
• Title searches - a title search and report undertaken by your legal representative which provides details of the property owner, confirming that the seller has a saleable interest in the property, and if any liens or encumbrances exist which will need to be releases at closing. It also shows easements or recorded legal rights to the property (for example, a neighbour or the local council may have been given legal access to a portion of the property for a particular use).

Lender's Mortgage Insurance

Generally, Lender's Mortgage Insurance is required if you are borrowing more than 80% of the value of the property; however this condition varies depending on property type, location of the property, loan type, etc. Lender's Mortgage Insurance protects the lender, not the borrower(s), against loss in the event that you default on the loan. It should not be confused with mortgage protection insurance for borrowers.

In the case of mortgagee exercising power of sale, if the property is subsequently sold by the lender at a price that does not cover the outstanding amount of the loan in full, Lender's Mortgage Insurance will cover the difference in the debt still owed to the Bank after the sale of the property.

Rates

From the settlement date, you are responsible for all the council, water rates and levies on the property you purchase. You may have to reimburse the previous owner on a pro rata basis for any payments they have already made. Your solicitor/conveyancer will work these out for you.

Building insurance

The responsibility for insurance and risk of loss can vary in each State/Territory, so it is wise to check with your legal representative as to exactly what type of cover you will need. It's important to remember that you must have the building insured before the settlement date otherwise we may not make your loan available. It's best to insure the property as soon as you exchange contracts. You'll also need to maintain suitable adequate insurance cover during the term of your loan. BankSA can assist in providing your insurance cover from the time of exchange of contracts until the date of settlement and ongoing.

Body corporate fees, sinking funds and liability insurance

When purchasing into a property that may have one or more owners such as strata title property(s), you may pay additional ongoing costs involved with the maintenance and insurance of the property. These include body corporate fees, contribution to sinking funds and liability insurance to cover any damage to the building and common property.

Talk to us about buying a home

If you'd like to talk about the costs associated with buying a home, call a BankSA home loan expert on 13 13 76 or drop by a BankSA branch.