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Looking to break into the property market? We outline some of the upfront and ongoing costs associated with home ownership as an owner-occupier.
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The Australian dream of home ownership is no easy feat. It requires hard work, sacrifice and years of saving. It’s a marathon endeavour Millennials and Gen Z know well, as they scrap and hustle to enter the market amid yo-yoing interest rates and elevated costs of living. But the battle doesn’t end with the deposit; there are other upfront payments to factor in, and ongoing costs too. Here, we shed light on some of the costs associated with buying a home to help you plan ahead.
A common goal for prospective first-home buyers is to save a 20% deposit to avoid needing to pay lenders mortgage insurance, however, this can feel out of reach for a lot of people. Since the introduction of the Australian Government 5% Deposit Scheme, it’s not uncommon for prospective buyers to aim for just a 5-15% deposit instead. Considering this, it’s important to work out how much you can afford to save towards your deposit, and what the average deposit price is in the area you’re interested in moving to.
According to the latest release on housing mobility and conditions by the Australian Bureau of Statistics (ABS), in 2019-20, the average size of a deposit for first-home buyers across Australia was $90,0001. The highest deposits were paid by residents in New South Wales and the Australian Capital Territory, averaging $109,000 and $108,000 respectively.
The same release also revealed the average value of dwellings bought by first homeowners was $583,000, with New South Wales and Victoria recording the highest values and Tasmania the lowest.
Along with your deposit, there are a range of other potential upfront costs to be aware of when buying a home. A few may include:
LMI is insurance a lender takes out to protect itself against the risk of a buyer not being able to meet the required loan repayments. This can apply if you’re borrowing more than 80% of your home’s purchase price from a lender.
Stamp duty is a land transfer tax levied by state/territory governments on certain purchases, like buying land or property. It’s a one-off fee paid upon settlement, and how much it costs will depend on where you live and the property’s value.
Some buyers choose to hire a lawyer or conveyancer to manage the legal process of transferring property ownership from a seller to a buyer. Their role typically includes:
Responsibilities and costs can differ between conveyancers and lawyers based on their area of specialisation, so consider researching both options carefully and enquiring directly with them to determine the scope of their work and any associated fees.
Once you’ve purchased the property (yay!) you’ll start life as a homeowner, which unfortunately, doesn’t come free (boo!).
What you pay weekly, fortnightly or monthly to pay off your home loan will vary depending on the type of home loan you choose and the current interest rate.
Electricity, internet, gas and water bills are additional expenses you’ll need to pay for as an owner-occupier. What you pay for these services will typically depend on the provider you connect with, how many people are living in the home, and whether you’re eligible for any concessions.
Council rates help pay for things like community services, projects and infrastructure, such as road maintenance, bin collections, libraries and parks. Rates are usually paid in quarterly instalments or annually, and what you pay will depend on where you live.
If you live in a shared development, like an apartment, unit or townhouse, you may need to pay regular fees to support operation, repairs and maintenance of common property (for example, a shared lift, pool or gym).
What you spend on maintenance and repairs can depend on a myriad of factors, including:
Planning for these costs can be tricky, as some things you may be aware of based on a building/pest inspection prior to buying your home, while others may be discovered as you settle in. Cue Forrest Gump’s iconic line: “My momma always said, ‘Life was like a box of chocolates, you never know what you’re gonna get’.” Same goes for owning a home. Sometimes, little things pop up out of the blue that need attending to.
Repairs can involve all sorts of things; repointing a roof after finding a leak, fixing a dilapidated fence, patching up damaged plaster, retiling a pool, or even mould removal from water damage in a bathroom.
Maintenance is more about keeping things in good shape; for example, polishing hard-wood floors, cleaning gutters or arranging professional servicing for your air-conditioner or heating unit.
Updates are usually cosmetic, like a fresh lick of paint or installing a new wardrobe system. They’re not necessarily needed but they go a long way toward making your space feel fresh and/or functional.
Depending on the type and level of cover you choose, home and contents insurance may help cover the cost to repair or replace your home and belongings in the event they’re damaged or destroyed because of a policy-listed event, like theft, flood, fire or accidental damage.
The price of your premium (the money you pay to be insured) can be determined by a range of different factors, including:
Different insurers can have different inclusions, exclusions and limits on their insurance policies. Always read the relevant Product Disclosure Statement (PDS) to know exactly what is and isn’t covered by your policy.
To determine what your insurance may cost, consider trying our home and contents calculators. These tools (intended as a guide only) help estimate what it might cost to rebuild your home or replace your contents to help you determine how much you’d like to be insured for.
Bendigo and Adelaide Bank Limited (ABN 11 068 049 178, AFSL and Australian Credit Licence 237879) (“Bendigo Bank”) is the credit provider. Credit services are provided by Tiimely Pty Ltd (ABN 41 605 696 544 and Australian Credit Licence 496431) (“Tiimely”). Insurance Australia Limited trading as NRMA Insurance (ABN 11 000 016 722) (“IAL”) is a member of AFCA and does not hold an Australian Credit Licence. IAL may receive a commission from Bendigo and pay a commission to Tiimely if your loan application is approved.
Information is current as at the date of publication and may be subject to change. All content on the NRMA Insurance Blog is intended to be general in nature and does not constitute and is not intended to be professional advice. It does not take into account your individual objectives, financial situation or needs. References to third-party organisations, products, services or brands on the NRMA Insurance Blog are for informational purposes only and do not imply any affiliation with or endorsement by NRMA Insurance, unless expressly stated otherwise.
