Costs to consider before buying your first home

The advertised price is only one part of what you will pay to become a homeowner. The costs buying your first home can arrive at different stages - before you make an offer, when you sign a contract and again at settlement. Planning for them early gives you more choice, helps protect your savings and makes the move from renter to owner feel far more manageable.

For many first home buyers, the biggest surprise is not necessarily one large bill. It is the combination of smaller expenses around the purchase, alongside the deposit and the first loan repayments. The right budget should leave room for each of them, rather than putting every available dollar towards the property price.

Start with the deposit and loan costs

Your deposit is usually the largest upfront commitment. A 20% deposit can help you avoid Lenders Mortgage Insurance (LMI), but it is not the only path into the market. Many buyers purchase with a smaller deposit, provided they meet their lender’s criteria and can cover any applicable LMI or have an eligible government guarantee.

LMI protects the lender, not the borrower, if the loan is higher relative to the property value. Depending on the lender and loan product, LMI may be payable upfront or may be added to the loan amount. Adding it to the loan can preserve cash for other purchase costs, although you will then pay interest on it over time.

For some buyers, a low-deposit loan may be suitable depending on their circumstances, when property prices are rising faster than your ability to save a larger deposit. On the other hand, waiting to save more may reduce your loan size, repayments and overall interest. The better option depends on your income, savings habits, property goals and comfort with the repayments.

You should also allow for possible loan application, valuation and settlement fees. These vary between lenders and loan products. Some lenders waive selected fees; this varies between lenders and loan products. While a loan with a lower advertised rate may charge fees that need to be considered alongside the rate. Looking at the full loan structure is more useful than comparing one number in isolation.

Costs buying a first home before you commit

Before you sign a contract, you may spend money investigating whether a property is right for you. These costs are valuable because they can identify issues that are expensive to fix after settlement.

A building and pest inspection is a common example. It may identify structural concerns, moisture damage, termite activity, poor drainage or unauthorised work. Older homes may need more careful investigation, while apartments can require close attention to the owners corporation records and upcoming works.

A conveyancer or property solicitor should review the contract of sale and vendor statement before you make an unconditional commitment. They can assist in explaining special conditions, easements, planning restrictions, owners corporation obligations and settlement timing. This is particularly important in Victoria, where the contract paperwork can reveal details that affect how you use or improve the property.

If you are buying at auction, there is generally no cooling-off period. It is generally prudent to have the contract reviewed, your finance assessed and inspections completed before bidding. The cost of preparation is usually far less than the cost of finding a problem after you have committed.

Stamp duty can change your numbers significantly

Stamp duty, also called transfer duty in some states, is often one of the largest costs after your deposit. The amount depends on the property price, location, buyer type and available concessions or exemptions.

First home buyer assistance differs across Australia and can change with government policy. In Victoria, eligible buyers may receive a duty concession or exemption depending on the property value, whether they will live in the home and other eligibility conditions. There may also be separate support for eligible buyers purchasing off-the-plan or using relevant government programs.

Do not assume a concession applies just because the property is your first purchase. Your residency plans, prior property ownership, relationship status and the property’s value can all matter. Understanding your likely duty position before making an offer gives you a clearer maximum purchase price.

The settlement costs to put in your budget

Once your offer is accepted, several costs come into focus. They may be paid before settlement, at settlement or soon after you receive the keys. Your conveyancer will provide a settlement statement that sets out the relevant adjustments and payments.

Common costs may include:

• conveyancing or legal fees and searches

• title transfer and mortgage registration fees

• building and contents insurance

• council rates, water rates and owners corporation adjustments

• bank cheque or electronic settlement charges, where applicable.

Rates and other outgoings are generally adjusted between buyer and seller at settlement. That means you may reimburse the seller for their share of prepaid costs from the settlement date onwards. It is normal, but it can catch buyers off guard if it has not been included in their cash estimate.

If you are buying a unit, townhouse or apartment, ask about owners corporation fees. Regular levies are only part of the picture. Meeting minutes, maintenance plans and financial statements may point to major works or a special levy ahead. A lower purchase price can be less appealing if significant building expenses are waiting around the corner.

Do not forget the cost of moving in

Settlement day is a milestone, not the end of spending. The first few weeks in a new home often bring practical costs that are easy to underestimate: removalists, utility connections, internet, locks, appliances, window coverings, furniture and urgent repairs.

Insurance should be in place from the date required under your contract, which may be before settlement. For a house, you will usually need building insurance as well as contents cover if appropriate. For a strata property, the owners corporation may insure the building structure, but you should understand what is and is not covered by that policy.

Many buyers also choose to keep an emergency savings buffer after settlement. A hot-water service, leaking tap or unexpected car repair does not wait until your home loan feels comfortable. Retaining some accessible savings can prevent a manageable surprise from becoming expensive debt.

Build a realistic first-home budget

A useful budget separates the money needed to buy from the money needed to live in the home. First, estimate your deposit, duty, LMI if applicable, legal costs, inspections and settlement adjustments. Then consider your ongoing repayments, rates, insurance, owners corporation fees, maintenance and household bills.

It may be helpful not to base your decision solely on the maximum amount a lender may approve. Borrowing capacity is a lending assessment, not a personal spending target. A repayment that leaves room for savings, family commitments, travel, maternity or paternity leave, and interest rate changes is often a more sustainable choice.

Your loan structure matters here too. An offset account may help reduce interest (subject to the features and terms of the loan product), while keeping funds accessible, though its value depends on the loan features, fees and how consistently you maintain a balance. A fixed rate can offer repayment certainty for a period, while a variable rate may provide greater flexibility. Neither is automatically right for every first home buyer.

A mortgage broker can explain lending options, lender policies and the costs involved in purchasing a property, and help you understand how different loan structures may apply to your circumstances. Any credit assistance should take into account your individual objectives, financial situation and needs.

Buying your first home can be an exciting milestone. Understanding the costs involved before you begin may help you make more informed decisions about what is affordable for your circumstances.

Disclaimer

This article contains general information only and does not take into account your personal objectives, financial situation or needs. It is not intended to constitute credit advice. Lending is subject to lender assessment and approval criteria. Fees, charges, government policies and eligibility requirements may change over time.

Inspiration Lending Pty Ltd Credit Representative 569537 is authorised under Australian Credit Licence 389328 | ABN 20687381737.