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How Much Money Do You Need to Buy a House

How much money do you need to buy a house?

When we think about buying a house, most of us are focused on the purchase price and what this looks like in terms of securing finance. 

While this is an integral part of purchasing a home, several other costs must be factored in. 

These costs can vary depending on the state or territory in which you live, if you are a first-home buyer, whether building new or buying an established home. 

In this guide, we’ll delve into what to expect when buying in Western Australia in terms of costs so you can start your journey into property ownership fully informed. 

 

The Importance Of Preparation 

It is so exciting to start looking at potential new homes to buy – especially if you have been renting long-term and this will be your first property. 

However, as buying can be very emotional it is vital to focus on the numbers and not put yourself in a situation where you cannot meet the financial obligations associated with your property purchase. 

Even if you have pre-approval for a loan, it is important to ensure you have factored in all associated costs with buying before getting too far into this process. 

This gives you the best platform from which to set your budget and understand its limitations. You’ll be better positioned to make an offer on appropriate properties and avoid getting caught short or over-stretching yourself.

 

Costs Involved With Buying A House In W.A.

Initial Payment Considerations 

When planning to buy a property, it’s common for financial institutions to look for an upfront payment (deposit) ranging from 5% to 10% of the property’s value. Although a higher initial payment of 20% or more is often advantageous, achieving this can be challenging. We’ll discuss alternative strategies for this later. 

It’s beneficial to bear these percentages in mind while setting your budget and considering which properties to view. 

Bank Fees

Home Loan Fees

Applying for and setting up home loans usually involves various charges by banks and other financial entities.

These might include: 

  • Establishment costs
  • Property valuation fees
  • Document preparation fees
  • Bank cheque charges
  • Annual account service fees 

These one-time fees might be included in the loan amount, though this could impact the funds available for purchase. It’s advisable to investigate these charges thoroughly before making any commitments.

Lenders Mortgage Insurance 

If your upfront payment is below 20% of the home’s value, you may be required to pay a Lenders Mortgage Insurance (LMI) fee. 

This insurance is charged as a percentage of your loan amount, generally between 1% to 3%. 

For instance, on a $600,000 loan, a 3% for LMI equals $18,000 – a significant factor to consider in your overall cost calculation. 

Government Fees

In Western Australia, property purchasers encounter two primary fees:

  1. Mortgage Registration Fee: Paid to Landgate, this fee enables the registration of the mortgage against your property. As of 2023, it’s around $200.
  2. Transfer Fee: This fee, ranging between $200 to $500 (as of December 2023 for homes valued under $200,000,000), is for transferring property ownership and updating the register. 

Stamp Duty 

Stamp duty is a substantial cost in property transactions across Australia, independent of your loan or deposit amount. It’s based on the property’s dutiable value, either the purchase price or its overall worth in certain cases. 

In Western Australia, this cost doesn’t follow a fixed percentage but adheres to a specific scale, varying with the property value.

For example, a $450,000 property might attract around $15,390 in stamp duty. There are concessions available for first-home buyers, which will be discussed further.

Ensure you take into account stamp duty and relevant fees when determining total cost and calculating required deposit

Legal Representation Costs

Employing a legal expert, like a conveyancer or solicitor, is essential for property transactions. They handle various tasks, including title searches, contract review and finalising the sale. 

The costs for these services in Perth typically range from $1200 to $1900, with a government-set maximum fee in place. 

 

Other Costs To Consider  

Not directly associated with purchasing a home, but still worthwhile adding to the list are:

Moving Costs

Unless you have a willing group of friends and family and access to a large truck, you should look at what it will cost to move into your new home. 

In Perth, most removalists charge an hourly rate which also accounts for the time spent getting to and from their depot. Be sure to shop around and compare removalist prices and check whether they offer insurance or levy any added charges. 

Home Insurance 

Not only an upfront cost, this will be an annual charge that continues while you own the home. 

It is wise to organise home and contents insurance to start on the day of settlement to protect you against anything unexpected from day one. 

Utility & Service Connections

Setting up your electricity, gas, internet or similar services may incur an initial establishment or transfer fee if you are moving accounts to a new address. 

Any fees for setting up your water account with W.A.’s Water Corporation will be managed by your conveyancer as part of the settlement process. 

 

How Building Over Buying Can Save You Money 

Building a new home can be a cost-effective alternative to buying an existing one. The Western Australian and Federal Governments offer grants and subsidies for new home builds which can significantly lower the costs. Eligible individuals might access grants up to $35,000 and potentially reduce stamp duty.

Government grants can make building a new home cost effective

Stop Renting Perth – Helping You Become A Homeowner Sooner

For those new to home building, we offer guidance and strategies to navigate the process efficiently. 

With a range of home designs and land options, our team assists in exploring all funding avenues, even for those without a large initial deposit. 

To learn more, book your obligation-free consultation today at 0402 513 446.

See If You Qualify

We’re here to help, so let’s get started! it’s time to stop renting and start taking steps towards home ownership.