What are the extra costs involved in buying a home that I should consider?

Not all of the following costs apply to all situations—so think about which ones might to yours.

Stamp Duty
There are two types of stamp duty you need to be aware of: Duty for the property transfer & Duty for the registration of your mortgage. Stamp duty is charged by state and territory governments so the amount you will pay depends on where your chosen property is located. It will also vary according to the purchase price of the property. In some states/territories, stamp duty concessions may be available to certain purchasers, for example, if you are building a new home. Even with concessions in place, stamp duty can significantly add to the cost of a property so be sure to factor it into your budget. You can calculate how much duty you may need to pay by using an online Stamp Duty Calculator. For more information take a look at the website of the revenue office in your state or territory.

Conveyancing Fees
Buying a home is a legal process; this means that after signing and exchanging contracts you’re legally bound to buy the property. It is vital that buyers speak to their conveyancer or solicitor about the conveyancing process before exchanging contracts to avoid the common pitfalls, such as forfeiting the deposit if you don’t commit to the sale. Conveyancers/Solicitors will usually charge a single fee, but may not include any necessary searches in the price, so be sure to ask about any extra costs.

Pre-purchase Inspections
The contract doesn’t cover the quality of the buildings on the property – what you see is what you get. This is otherwise known as ‘caveat emptor’ or ‘buyer beware’. The buyer should organise both a Pest Inspection – which advises of any pest activity affecting the property – and a Building Report – which advises of any structural problems.
Note: You may also want to consider having the electrical wiring and plumbing examined, as this isn’t covered in a building inspection.

Strata Report
If you’re buying a unit, townhouse or villa, you require a strata report. This summarises an inspection of the strata records of the owner’s corporation, identifying which insurances are in place, quarterly levies, any special levies, the financial position of the scheme, any ongoing maintenance problems and any issues noted in minutes of owner’s corporation meetings. Any major issues highlighted in any of the reports may be used as a negotiating tool to reduce the purchase price.

Can I make an offer on a property if I don't have finance pre-approval?

Although there is nothing stopping you from making an offer, it is always safer to have your finances, or a conditional approval in place. This can save any disappointment in the long run.

We suggest the first stage of the home buying process is to check if your lender will approve your loan before you make an offer. You’ll have heard different terms used to describe this process; pre-approval, approval-in-principle and conditional approval are the most common. Something you should be aware of is that these terms are used by different lenders to explain different types of assessments of your financial position before they give you a loan. For some, they use it as an affordability enquiry; for others, as conditional approval, but with many more checks to be done. Confusing right? You should always check with a lender what their approval process involves – and exactly what it covers – before you make an offer on a home.

What is a cooling off period?

When buying a property, there’s a very critical stage that happens after you sign the contract called the ‘cooling off period’. This stage starts on the very same day you receive a fully signed copy of the contract. This cooling off period is usually five business days long – weekends and public holidays not included. If you change your mind about buying a property during this time, you can cancel the sale.

Be aware, though, that cancellation of the contract incurs a penalty equivalent to 0.25% of the total selling price of the property. So if the property sells at $500,000, the penalty will be $1,250. Once the contract is terminated within the cooling off period, the seller must refund the deposit within 14 days after the cancellation, with the penalty already deducted.

Once I put in an offer on a property, when is the deposit due?

A buyer will be encouraged to pay a deposit when signing the offer. If the deposit is greater than 10 per cent of the price, the contract becomes an ‘Instalment Contract’. Whilst paying a deposit is not something that is legally required, buyers show the seller that they are making a serious offer and showing their goodwill. Deposits can be paid by way of cash, cheque or electronic transfer of funds. They can also be paid using deposit bonds or bank guarantees. Buyers should seek advice from their financier as to any associated costs with deposit bonds or bank guarantees before paying a deposit in this form.

Do I get my deposit back if I don't obtain finance or the building & pest inspection is unsatisfactory?

If you need to obtain a loan to buy the house then you must place a finance clause on the contract. REIQ and ADL contracts both have special areas to write in a finance clause and each have similar requirements to ensure the contract becomes “subject to finance”. Make sure you discuss with your bank how long it will take for them to give you a letter of unconditional approval as you will need to keep that in mind when writing it into the contract.

For example, if the bank needs 14 days to process your application for finance, then make sure that that is the timeframe in place on the contract. If you sign a contract without a finance clause, and you need to obtain finance but your application is unsuccessful, the seller can terminate the contract, keep your deposit and sue you for costs and losses if they resell it to another buyer at a lower price. Therefore, it is essential to include a finance clause to ensure you are protected.

Like the finance clause, you will need to ensure the contract has a condition that allows you to terminate should the building & pest inspection report be unsatisfactory. If the report finds structural defects, active termites or extensive termite damage, or if there are numerous issues which, when combined, add to a significant amount of work and costs borne by the buyer after settlement, then you may be able to elect to terminate the contract and get your deposit back. This is depending on the issues that arise, as the contract states that you must be reasonable. In this case, it’s better to call us and discuss a negotiation of price after a quote for the work has been completed. While the seller is not obliged to negotiate, they may decide to offer you a reduction. If the seller does not agree to negotiate then you may be forced to accept minor issues.

When should a buyer organise insurance for the home they are buying?

While it’s the vendor’s responsibility to hand over the property on settlement in the same condition as at the time of exchange, if there’s no insurance policy in place, the question of where the money comes from may be an issue.

With a house, you have an insurable interest from the moment that you exchange contracts.
Your mortgagee requires a copy of a building insurance policy noting their interest as mortgagee, and usually advises the minimum insurance they require. Otherwise it should cover the insurable value of the property. These details are usually part of the loan- document requirements, so insure it from the date of exchange of contracts.

For strata units, building insurance (and other related insurances such as workers compensation and public liability) is arranged by the owner’s corporation and the purchaser is required to obtain contents insurance and possibly third party insurance. Your solicitor or conveyancer arranges a certificate of currency of insurance for the building to confirm that its current and also provides a copy to your mortgagee.

I'm a first home buyer. Can I get the First Home Owner Grant?

This will vary between different states and territories, but in Queensland, it may be possible for you to get what’s now called The Great Start Grant. The Grant is $15,000 for first timers building or buying a new home up to the value of $750,000 (this includes buying off the plan).

There are two ways you can apply for the grant:

    1. You can lodge your application through an ‘approved agent’, which is the bank or financial institution providing your mortgage
    2. You can download the application form, complete and lodge it yourself with the authorities once you have completed the sales transaction.

You also need to provide the government with supporting paperwork to prove you’re eligible, including the contract of sale, contract to build, and proof of your identity.

If you apply via a lending institution, grant payments will usually be available for settlement or the first construction progress payment. If you apply directly to the government agency, most will pay the grant into your bank account when your purchase is complete.

For a quick way to find out if you’re eligible, or for more information, click here.