When you're looking at property, the purchase price is the number that's easiest to see. It isn't the whole cost of buying. Depending on the property, state and your circumstances, you may also need to account for transfer duty, conveyancing, inspections, lender costs, registration fees, settlement adjustments and the costs of getting the property ready to live in. Working these out before you set your maximum purchase price gives you a much more realistic picture of what you can afford.
A common budgeting mistake is treating the purchase price as the entire budget. The price is what you pay for the property. It doesn't cover what it takes to complete the transaction, and it says nothing about what the property costs to run once it's yours. A budget built on the price alone can look comfortable on paper and still leave you short of cash at settlement, or stretched in the months after it.
The easy mistake is to look at a property listed for $800,000 and think, "Can I afford an $800,000 house?" The better question is, "What would it actually cost me to buy this property, complete the transaction and comfortably own it afterwards?"
The parts of a buying budget
It helps to keep these numbers separate rather than folding them into a single figure. A realistic buying budget has seven distinct parts:
- The purchase price, which is what you agree to pay for the property.
- Upfront buying costs, which you pay to investigate and secure the property.
- Your deposit, which contributes towards the purchase price rather than sitting on top of it.
- Loan-related costs, which depend on your lender and your borrowing position.
- Settlement adjustments, which square up certain rates and charges between buyer and seller.
- Ongoing ownership costs, which begin once the property is yours.
- A financial buffer, which is the money you deliberately don't spend.
They behave differently, they fall due at different times, and only some of them are part of the transaction itself.
What to budget for, and when
Before you buy
- Building and pest inspections. See building and pest inspections.
- Strata or body corporate reports where relevant. See strata and body corporate.
- Lender or valuation costs where applicable.
- Buyer's agent fees if you choose to use one.
When you buy
- Deposit. The amount and timing depend on the contract and transaction. See deposits in property transactions.
- Transfer duty where applicable. See transfer duty and first home concessions.
- Conveyancing and legal fees. See what conveyancing costs.
- Disbursements and searches ordered on your behalf.
- Lender fees, such as application or establishment fees.
- Government registration fees for the transfer and any mortgage.
- Electronic settlement costs. See the cost of electronic settlement.
- Settlement adjustments where they apply. Amounts may be adjusted between buyer and seller for certain rates, charges or levies that have been paid in advance or accrue around settlement. See common settlement adjustments.
- Lenders mortgage insurance (LMI), which may apply depending on your loan-to-value ratio, lender and circumstances. Some government guarantee schemes can change whether LMI applies.
Once you own the property
- Mortgage repayments.
- Council rates and water charges.
- Insurance. Understand when you need building and contents cover and what your contract and lender require. When risk passes to you can depend on the state or territory and the contract, so see property condition, risk and insurance.
- Strata or body corporate levies, including any special levy raised after you move in.
- Utilities.
- Maintenance and repairs, including anything you want to fix or change early.
Not every buyer will have every cost on these lists, and the amounts vary substantially depending on the property, the state or territory, the purchase price and your circumstances.
Some costs complete the purchase, others start after it
Some costs are part of getting the transaction completed. Others begin once you own the property.
The distinction matters because the two groups answer different questions. One-off and upfront costs affect how much cash you need available to complete the purchase. Ongoing costs affect whether you can comfortably afford the property after settlement.
Working out what you can borrow and what you can comfortably repay is a separate question, covered in borrowing capacity versus purchase price.
If it's the ongoing costs that worry you, stress-testing your budget looks at whether they still work if your circumstances change.
Why buying costs vary by state
The broad categories of buying costs are similar across Australia, but the amount you pay can vary depending on the state or territory, property type, purchase price and your circumstances. Transfer duty and first home buyer concessions are particularly state-specific, so check the current rules and calculations for the state where you're buying.
For a state-by-state view, see buying costs by state, stamp duty by state and conveyancing costs by state.
Concessions, grants and schemes
Some buyers may qualify for first home concessions, grants, guarantees or shared equity programs. Eligibility varies and schemes can change, so check the current rules before including one in your budget. See stamp duty exemptions and concessions, and confirm current figures with the revenue office for the state or territory where you're buying.
Don't budget right up to the edge
Your buying budget shouldn't assume that every dollar of available cash goes into the transaction. Keep some financial breathing room for unexpected costs, repairs, changes in household expenses or simply the period after settlement when your finances are adjusting to a new mortgage and home.
A special strata or body corporate levy raised soon after you move in is a good example. It isn't a buying cost, but it's exactly the kind of thing a buffer is for. Stress-test your budget before you commit to a maximum price.
Which buying costs are easy to forget?
These are the ones that tend to sit outside the headline numbers:
- Lenders mortgage insurance, where it applies.
- Settlement adjustments.
- Strata or body corporate costs.
- Registration and search fees.
- Immediate repairs or getting the property set up.
- Moving costs.
For more, see the buying costs people most often overlook.
When are costs paid?
Some costs arise before you commit to a property, while others are paid at or around settlement. Some ownership costs begin after settlement.
- Inspections and reports often come before you commit.
- Professional fees may arise throughout the transaction.
- Duty, registration and settlement costs depend on the transaction and the state or territory.
- Moving and setup costs come after the purchase.
Not every transaction follows the same sequence, so confirm the timing that applies to yours.
Working out your own numbers
This is a framework for the cost side of your budget, not the last word on every individual cost. To put real figures against it, start with borrowing capacity versus purchase price, then work through the real cost of buying a home.
Some of the costs in a property purchase are predictable. Others depend on what your conveyancer finds, what the contract requires and how the transaction is structured. Good conveyancing helps you understand those costs before they become surprises.
The number on the listing is the starting point for your budget, not the finished calculation.
