How Much Does It Really Cost To Buy A House In Victoria?

For many people, owning a home is a dream come true. The realization of this dream often involves much more than paying for a house and receiving its title deed. 

There are a number of indirect costs that prospective new homeowners fail to include in their budget for the property in question. Many times, the sum of these indirect costs often hikes the final cost of home ownership by a considerable margin. This article discusses a few indirect costs associated with property acquisition for the benefit of prospective new homeowners.

Mortgage-Related Costs

Mortgages are perhaps the most common option for prospective homeowners looking to finance the acquisition of property.

There are various indirect costs associated with mortgage financing. For example, many lenders will charge an arrangement fee before the client's mortgage application is processed. The arrangement fee may be a fixed sum or it may be calculated as a percentage of the total value of the mortgage. Some lenders may refund the arrangement fee after the property has successfully been acquired.

The valuation fee is also often overlooked when calculating the cost of getting a mortgage. The valuation fee is meant to enable the lender to carry out a physical inspection of the property that's to be bought. Lenders do this to ascertain that the property actually exists and that its condition (and value) provides adequate security for the mortgage.

Taxes And Related Costs

Prospective new homeowners often forget that they may be required to pay taxes in relation to the property acquisition. In Victoria, home buyers are required to pay a land transfer duty before they can be considered the (new) legal owners of the property in question.

The amount of money to be paid as land transfer duty is calculated as a percentage of the current market value of the home, or as a percentage of its purchase price.

New homeowners are allowed a 30-day grace period during which they should have paid the land transfer duty. Upon expiry of the grace period, interest is charged on the amount to be paid as duty and a penalty tax may be imposed.

Legal Fees

The law does not require a homeowner to enlist the services of a conveyancing solicitor or a property law specialist when buying a house. However, the complex nature of legal aspects associated with property transfer often prompts many homeowners to seek professional assistance.

The cost of legal service when buying property often depends on the payment option agreed upon with the lawyer or solicitor.

Clients may be billed by the hour, they may agree on a fixed-fee (one-off payment) for all services to be rendered until the purchase is made.

Remember to factor in the above-mentioned costs when calculating how much that first house will actually cost.