This is what you need to know about closing costs
21 Mar 2021

We've written previously about mortgage lending, and we have also run webinars discussing the various types of loan.

Today, let's take a short look at the sundry costs of buying a property.

Deposit gap

The biggest 'out of pocket' cost when buying a property these days is usually the deposit. 

At the time of writing the government has put in place a First Home Loan Deposit Scheme (FHLDS) which enables some first homebuyers to buy with a 5% deposit.

More commonly, a typical deposit to buy a property in Australia required a deposit of 10% to 20% of the purchase price. 

With the mean dwelling price in Australia rising to $728,500 in 2020 it's not hard to see why the deposit has become such a challenging hurdle for many buyers. 

In other articles we have covered saving tips, and how the 'bank of Mum and Dad' has become one the bigger lenders in Australia.

Stamp duties

There have been many calls to scrap stamp duty over the years, with many economists preferring a shift towards a broad-based annual lad tax.

But a glance at the below graph shows why to date that hasn't become a reality. 

In New South Wales alone, Revenue NSW can raise up to $10 billion dollars per annum from stamp duty and land transfer duties. 

 


In Australia, each state has its own stamp duty thresholds, and therefore we won't try to cover all of them in this post.

It's relatively easy to find out what the stamp duty on a prospective purchase might be, simply by using an online stamp duty calculator for the state you intend to buy in.

Note that the stamp duty payable may differ depending on whether you are a homebuyer or an investor, while there are also sometimes surcharges for non-resident buyers.

It's also worth noting that periodically state governments put in place incentives and exemptions, so it's important to speak to a market professional to check what you may qualify for. 

Other closing costs to budget for

As you can see the stamp duty payable will vary significantly depending on which state or territory you buy in and depending upon the purchase price. 

Below is a stylised example of a property we bought recently for a young homebuying couple in Brisbane.

It gives you an idea of some of the possible or likely costs of buying a property, and what you might need to budget for. 

Figure 1: A recent Brisbane purchase of $700,000

Item

Approximate Cost ($)

Stamp duty and mortgage transfer

$20,000

Building and pest inspection

$600 plus GST

Buyer’s agent fee

$7,000 plus GST

Solicitor’s fee

$1,700 plus GST


In this instance, in addition to the deposit and including GST the total closing costs came to approximately $30,000. 

We always recommend that you get a building and pest inspection before buying a property.

If you are buying a unit or apartment which is part of a strata scheme, were also recommend that you read this post and this post as there is an important report that you should consider offering before you buy. 

Investors may also look to purchase a depreciation schedule from a Chartered Surveyor, which is another cost that investors may look to budget for (though in most cases the tax deductions will more than cover the cost of the surveyor's fees). 

To find out more about our property buying services see here