What Expenses Do First Home Buyers Forget to Budget For?
Saving the deposit is a major milestone, but the deposit is not the only money you need when buying your first home. Here are some of the costs that are easy to overlook — and why it is important to leave yourself some breathing room after settlement.
When you are preparing to buy your first home, it is natural to focus on the big numbers: the purchase price, your deposit and the mortgage repayments. But becoming a homeowner comes with a range of other costs, and some of them can arrive before or immediately after settlement.
Planning for these expenses early can help you avoid using every dollar of your savings on the deposit and then relying on credit when something unexpected comes up.
The key idea: your home-buying budget should cover more than the deposit. Allow for the costs of buying the property, moving in, setting up the home and keeping an emergency buffer after settlement.
1. Legal and Conveyancing Costs
Your lawyer or conveyancer plays an important role in the purchase process. They can help you understand the sale and purchase agreement, review property documents, complete the legal work and manage settlement.
Legal costs vary depending on the property and the work involved, so it is worth getting an estimate early rather than treating the cost as an afterthought.
2. Building Inspection Costs
A home can look great during an open home and still have issues that are difficult to see. A pre-purchase building inspection can help identify potential problems before you commit to the purchase.
Depending on the property, the inspection may highlight issues that need further investigation or repairs. Specialist reports may sometimes be appropriate as well.
3. LIM Reports and Other Property Checks
Buyers may also need to allow for property due diligence. A Land Information Memorandum (LIM) can provide useful council information about the property, while title searches and other checks can help you understand what you are buying.
Not every property requires the same checks. Your legal adviser can help you understand which reports are appropriate for the property you are considering.
4. Valuation Costs
In some circumstances, a lender may require a valuation of the property. Whether a valuation is required and who pays for it can depend on the lender, the property and the structure of the lending.
If you are buying with a smaller deposit, it is especially important not to assume that all of your available savings can simply be put towards the deposit.
5. Home Insurance
Home insurance is another cost that should be considered before settlement. Your lender may require appropriate insurance as part of the lending and settlement process.
It is worth getting an indication of the insurance cost for a property before you commit to buying it. The property’s location, construction, age and other characteristics can all affect the cost and availability of insurance.
6. Council Rates
Once you own the property, council rates become part of your ongoing household expenses. The amount varies between properties and locations.
When comparing homes, look beyond the mortgage repayment. Check the property’s rates and include them in your weekly or monthly budget.
7. Moving Costs
Settlement day is not the end of the spending. You still have to get your belongings into the house and get the utilities set up.
- Moving company or truck hire
- Packing materials
- Cleaning
- Storage, if needed
- Internet and utility setup
- Small items needed for the move
8. Immediate Repairs and Maintenance
This is one of the costs new homeowners can underestimate. Even when a property has been inspected, everyday maintenance and smaller repairs can still appear after you move in.
You might need to replace a lock, fix a leaking tap, buy tools, repair an appliance or deal with a maintenance issue that simply could not wait.
9. Body Corporate Fees
If you are buying an apartment, townhouse or another unit-title property, you may have ongoing body corporate costs. These can contribute towards shared property expenses and maintenance.
Before buying, understand the current fees, what they cover and whether any significant maintenance or additional levies are expected.
10. Furniture, Appliances and the Cost of Making It Home
Your first home may not come with everything you need. After settlement, you may suddenly realise you need curtains, a fridge, washing machine, beds, a sofa, basic tools or garden equipment.
You do not need to buy everything immediately. In fact, keeping some cash available can be more useful than trying to furnish the entire home on day one.
11. Your Emergency Fund After Buying
Perhaps the most important amount to budget for is the money you do not spend on the purchase.
It can be tempting to put every available dollar into the deposit so you can buy sooner. But once you own a property, unexpected costs become your responsibility.
Think beyond settlement.
Try to keep a cash buffer for unexpected repairs, household expenses and changes in your circumstances rather than leaving your savings account at zero.
A Simple Way to Think About Your First Home Budget
Instead of thinking only about how much deposit you need, separate your money into a few different buckets.
Don’t Let the Deposit Be Your Entire Budget
Saving a deposit is a major achievement, especially for a first home buyer. But getting the deposit together is only one part of becoming a homeowner.
The better approach is to look at the total cost of buying and owning the home. A property that fits your purchase-price budget may not be comfortable once you add rates, insurance, maintenance and other ongoing expenses.
Before you start making offers, work out what you can realistically afford, what cash you will need for the purchase itself and how much you want to keep available afterwards.
Frequently Asked Questions
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