1. The real cost of homeownership
Purchasing a home is a significant financial commitment, and many buyers focus solely on their deposit and mortgage repayments. However, several hidden costs can catch you off guard and impact your financial stability. Understanding these expenses can help you plan effectively and avoid unnecessary stress.
2. Upfront costs beyond the deposit
Stamp duty and government Fees
Stamp duty is one of the largest upfront costs when buying a property. In Western Australia, the amount varies based on the purchase price, with first-home buyers potentially qualifying for concessions. You can estimate your stamp duty using the WA Government Revenue Online Calculator.
Loan fees and lender's mortgage insurance (LMI)
Many lenders charge loan establishment fees, which can range from a few hundred to a few thousand dollars. If your deposit is less than 20% of the property value, you may also need to pay Lender’s Mortgage Insurance (LMI), which protects the lender in case of default. This cost can add thousands to your purchase.
Conveyancing and legal fees
You’ll need a conveyancer or solicitor to handle the legal aspects of the property transaction. Fees typically range from $1,000 to $3,000, depending on the complexity of the purchase.
3. Ongoing costs of homeownership
Council rates and strata Fees
Local councils charge annual rates based on the property’s value, which can range from $1,000 to $3,000 per year in Perth. If you purchase a unit or townhouse in a strata complex, you’ll also need to pay quarterly strata fees, covering shared property maintenance and insurance.
Home and contents insurance
Protecting your investment with home and contents insurance is essential. Premiums vary based on the property's location, age, and features, but you should budget at least $1,000 per year.
Maintenance and repairs
Unlike renting, homeowners are responsible for all maintenance and repairs. Unexpected expenses such as plumbing issues, roof leaks, or electrical problems can add up quickly. A good rule of thumb is to set aside 1-2% of the property value annually for maintenance costs.
4. Moving and transition expenses
Removalists and utility connections
Moving costs can range from a few hundred to several thousand dollars, depending on the distance and amount of belongings. Additionally, setting up electricity, gas, water, and internet connections often incurs connection fees.
Furniture and renovations
Many buyers overlook the cost of furnishing a new home. If renovations are required, even minor upgrades can cost thousands, so it's important to factor these into your budget.
5. How to prepare for hidden costs
Build a contingency fund
Having an emergency fund for unexpected home expenses can prevent financial strain. Ideally, set aside at least three to six months' worth of expenses.
Get professional advice
Consulting a financial adviser can help you navigate these hidden costs and develop a strategy tailored to your financial situation. Aspire2Wealth offers expert guidance to ensure you make informed decisions.
6. Final thoughts
While buying a home is an exciting milestone, the true cost extends beyond the property price. By understanding these hidden expenses and planning accordingly, you can enjoy homeownership with confidence. If you're preparing to buy a home in Perth, Aspire2Wealth can help you create a financial plan that suits your needs.
Sources
Aspire2 Wealth Advisers Pty Ltd ABN 42 125 897 903 is an authorised representative and credit representative of Charter Financial Planning Limited ABN 35 002 976 294, AFSL and Australian Credit Licence No. 234665.
This website contains information that is general in nature. It does not take into account the objectives, financial situation, or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
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