Hidden Costs of Buying Your First Home in Richmond

Important Note: This article provides general information only and does not constitute financial advice. Lending criteria, rates and requirements can vary between lenders and may change over time. Consider your circumstances and seek professional advice before making financial decisions.

Buying your first home in Richmond is a big deal. You’ve saved your deposit, scrolled through countless property listings and survived more open homes than you care to count. Then you finally find the one and start picturing yourself with the keys in your hand. But before you get too caught up in the excitement, there’s one important thing to remember: the purchase price isn’t the full cost of buying a home.

Your deposit is just one part of the upfront bill. Depending on your circumstances, you may also need to budget for transfer duty, conveyancing, building and pest inspections, lender fees, Lenders Mortgage Insurance, settlement adjustments, insurance and moving costs.

Then there are the ongoing expenses that come with actually owning the property. Some of these costs are easy to overlook, especially when you’re focused on saving enough for your deposit.

If you’re planning to buy your first home in Richmond, knowing what these extra costs could look like before you start house hunting can help you set a more realistic budget, protect your savings and avoid unpleasant surprises after you’ve signed on the dotted line.

Your Home Deposit Is Only Part of the Cost

Your deposit is usually the biggest upfront amount you will save, but it should not be your only savings target. The Australian Government's Moneysmart guidance on saving for a house deposit recommends considering the purchase price, buying costs and the amount you can borrow when working out your savings goal.

Depending on your circumstances and lender, it may be possible to purchase with less than a 20% deposit. However, a smaller deposit can sometimes result in additional lending costs.

That means having enough money for your deposit does not automatically mean you have enough money to purchase the property comfortably.

Before you begin making offers, it is worth understanding:

• your available deposit

• your estimated borrowing capacity

• government charges

• legal and conveyancing expenses

• inspection costs

• potential loan fees

• moving expenses

• your emergency savings after settlement

Working through these numbers before you start house hunting can give you a much clearer idea of what you can realistically afford.

If you are unsure where to begin, exploring your first-home buyer home loan options before making an offer may help you set a more practical property budget.

What Other Costs Should You Budget For?

The property price is only one part of the overall cost of buying a home. Here are some of the key expenses to factor into your budget.

1. Transfer Duty Costs

Transfer duty, often still called stamp duty, is one of the biggest costs buyers may face when purchasing property in NSW. Fortunately, eligible first-home buyers may qualify for assistance.

Under the NSW First Home Buyers Assistance Scheme, eligible buyers purchasing a new or existing home with a dutiable value of $800,000 or less can receive a full transfer duty exemption.

For eligible new or existing homes valued at more than $800,000 but less than $1 million, a concessional rate may apply. This can make a significant difference to the amount of cash you need upfront.

However, eligibility requirements apply, so you should not automatically assume you will qualify. Your solicitor or conveyancer can help confirm the duty applicable to your property transaction, while your first-home buyer mortgage broker can help you consider these costs when working out your overall finance position.

For first-home buyers, a relatively small change in the purchase price can affect whether a property sits inside or outside a government assistance threshold. If you are comparing properties around the $800,000 mark, it is worth understanding the potential transfer duty implications before increasing your offer.

Instead of asking, ‘How much will the bank lend me?’, consider how much you can comfortably afford after all the buying costs are included. A personalised finance strategy can help you assess your overall position before committing to a property.

2. Conveyancing and Legal Costs

Purchasing a home involves a legal transfer of property ownership. Most buyers engage a licensed conveyancer or solicitor to assist with the transaction.

According to NSW Fair Trading's conveyancing guidance, the conveyancing process can include:

• examining the contract for sale

• arranging relevant searches

• reviewing strata information where applicable

• arranging finance

• exchanging contracts

• arranging payment of transfer duty

• reviewing mortgage documents

• checking outstanding charges

• calculating council and water rate adjustments

• arranging the change of title

• completing final settlement checks

Fees vary depending on the professional you choose and the complexity of the transaction. There may also be disbursements for title searches, certificates and registration-related expenses.

For a first-home buyer, these costs should be included in the budget before making an offer rather than being treated as an unexpected settlement expense.

3. Building and Pest Inspection Costs

A property can look excellent during an open home while still having issues that are difficult to identify without professional inspection. Depending on the type of property you are considering, a building and pest inspection could uncover concerns involving areas such as structural condition, moisture, pests or maintenance requirements.

These inspections cost money upfront, but they can give you more information before you commit hundreds of thousands of dollars to a property. They are particularly important when preparing to bid at auction.

NSW Fair Trading's auction guidance recommends that buyers understand the property's condition and obtain professional building, pest and relevant strata reports before bidding. This is because buying at auction works differently from a standard private sale.

4. Auction Costs

Richmond and surrounding areas may have properties offered through both private treaty and auction. If you are buying at auction in NSW, you need to have your finances and due diligence organised beforehand.

NSW Fair Trading states that there is no cooling-off period when purchasing at auction. Buyers should have their borrowing position confirmed, inspect the property and review the contract before bidding.

That means costs, such as the following, may need to be paid before you even know whether you will successfully purchase the property:

• conveyancing

• building inspections

• pest inspections

• strata reports

If an auction property is on your shortlist, speak with your home loan broker before auction day so you have a clearer understanding of your borrowing position and maximum budget.

5. Strata Report and Strata Levy Costs

If your first home is an apartment, townhouse or villa within a strata scheme, you may face costs that buyers of standalone houses do not. Before purchasing, you may choose to obtain a strata report to better understand the scheme.

This can help you investigate issues such as:

• current strata levies

• planned building works

• available funds

• building insurance

• previous meeting records

• disputes or ongoing concerns

• potential special levies

NSW Fair Trading also identifies strata inspection reports as an important part of due diligence when relevant to a property purchase.

You should also consider ongoing strata levies when deciding whether a property fits your budget. A cheaper apartment with high strata costs may not necessarily be more affordable than a slightly more expensive property with lower ongoing expenses.

The key is to consider the total cost of home ownership, not just the mortgage repayment.

6. Lenders Mortgage Insurance Costs

Lenders Mortgage Insurance, commonly referred to as LMI, is another cost that can surprise first-home buyers. Borrowers may need to pay LMI when borrowing more than 80% of the property's value, although the exact requirements depend on the lender and loan arrangement.

LMI may be paid at settlement or, depending on the lender, added to the home loan. That is one reason a 10% deposit and a 20% deposit can produce very different overall loan structures.

However, waiting until you have a 20% deposit is not necessarily the right strategy for every buyer. Your circumstances, available government schemes, property market conditions and financial position all need to be considered. 

7. Home Loan Fees and Costs

The home loan itself may also involve fees. Depending on the lender and product, there may be costs associated with establishing or maintaining the loan.

These could include:

• application or establishment fees

• property valuation fees

• settlement fees

• annual package fees

• other lender-specific charges

Not every lender charges the same fees and some may waive particular costs depending on the product. This is why simply choosing the home loan with the lowest advertised interest rate may not always result in the best overall outcome.

8. Settlement Adjustment Costs

Settlement is the point where ownership of the property officially transfers to you. It can also involve several smaller costs that first-home buyers sometimes overlook.

Your conveyancer may calculate adjustments between you and the seller for property-related expenses. According to NSW Fair Trading, the conveyancing process can include calculating adjustments for council and water rates as part of settlement.

The exact amount depends on the property, settlement date and expenses already paid by the seller. These adjustments may be much smaller than your deposit, but they still need to be considered when calculating how much money you will need around settlement.

9. Home and Contents Insurance Costs

Insurance is another expense to include in your home-buying budget. Depending on the property and lender requirements, you may need appropriate building insurance as part of the purchasing process. Once you move in, you may also want contents insurance to protect your belongings.

For strata properties, some building insurance may be arranged through the owners corporation, but it is important to understand exactly what is covered.

Premiums vary depending on factors such as:

• property type

• property location

• construction

• insured value

• level of cover

• insurer

Insurance should therefore be considered as an ongoing home ownership expense rather than something to think about only after settlement.

10. Moving Costs 

Settlement is not the end of your spending. Getting the keys can begin another round of expenses.

Depending on your situation, these may include:

• removalists

• cleaning

• electricity connections

• gas connections

• internet setup

• furniture

• appliances

• locks and security

• curtains or blinds

• basic household items

Individually, some of these purchases may seem relatively small. Together, they can make the first few weeks of home ownership expensive.

It can therefore be sensible to avoid putting every dollar of your available savings into your deposit. Maintaining a financial buffer after settlement can give you greater flexibility when unexpected costs arise.

11. Repair and Maintenance Costs

One of the biggest differences between renting and owning a home is the responsibility for maintenance. Once you become the homeowner, unexpected repairs generally become your problem.

• A hot-water system could fail.

• An appliance might need replacing.

• A plumbing issue could appear.

• An older property could need work sooner than expected.

This is why calculating your maximum purchase price should involve more than simply checking whether you can make the mortgage repayment. A strong first-home buyer finance strategy should also leave room for maintenance and unexpected expenses. Buying at the maximum amount a lender is prepared to approve can leave very little financial breathing room if something goes wrong after settlement.

12. Council Rates, Water and Ongoing Ownership Costs

Mortgage repayments are generally your largest recurring housing expense, but they are not your only responsibility as a homeowner.

Your ongoing budget could also include:

• council rates

• water charges

• home insurance

• contents insurance

• strata levies where applicable

• maintenance

• repairs

• utilities

These expenses should be considered alongside your proposed mortgage repayment when deciding what you can comfortably afford.

Being approved to borrow a particular amount does not necessarily mean you need to spend the entire amount.

Before buying, ask yourself:

• Can I comfortably make my repayments?

• Could I still manage if interest rates changed?

• Can I continue building emergency savings?

• Do I have enough money for rates and insurance?

• Can I afford unexpected home repairs?

• Will I still have enough left for everyday living expenses?

Working through these questions as part of a personalised finance strategy may help you make a more sustainable property decision.

13. First Home Buyer Government Assistance

First-home buyers in Richmond should also investigate whether they qualify for NSW Government assistance. In addition to transfer duty assistance, eligible first-home buyers purchasing or building a new home may qualify for the NSW First Home Owner Grant.

Service NSW currently states that eligible first-home buyers may receive a $10,000 grant when buying or building a newly constructed home. Current eligibility includes value limits of less than $600,000 for an eligible newly constructed home or less than $750,000 for the combined value of eligible land and the home being built.

Eligibility conditions apply, so always check the latest government requirements before relying on a grant as part of your purchasing budget.

How Much Extra Should You Budget When Buying Your First Home?

There is no single amount that works for every first-home buyer in Richmond.

Your total purchasing costs will depend on factors including:

• the property price

• your deposit

• the type of property

• whether you qualify for transfer duty assistance

• whether LMI applies

• your lender

• conveyancing expenses

• inspection requirements

• whether you are purchasing through an auction

• strata costs

• your moving requirements

Instead of choosing an arbitrary savings figure, calculate the likely costs for the specific property and loan structure you are considering.

The Australian Government's Moneysmart home-buying guidance recommends budgeting for the deposit plus the additional costs involved in buying a home.

Your calculation should ideally include your:

Deposit + Buying Costs + Moving Costs + Emergency Buffer

This provides a much more realistic picture of your financial position than simply looking at the minimum deposit required.

Summing Up

Buying your first home in Richmond should be exciting, but careful planning can help you avoid stretching your finances too far. Your deposit is only one part of the cost, with transfer duty, conveyancing, inspections, LMI, lender fees, insurance, moving costs and ongoing expenses also worth factoring into your budget.

Before making an offer, make sure you understand both the upfront costs of buying and what you will need to comfortably manage the property after settlement. The goal isn't simply to borrow the maximum amount available, but to choose a property and home loan that fit comfortably within your financial position.

Ready to Buy Your First Home in Richmond?

If you are thinking about buying your first property, Richmond Residential can help you understand your borrowing position, compare first-home buyer loans and develop a clear finance strategy before you start making offers.

Don't wait until you have found the perfect property to discover what you can actually afford.

Book a home loan consultation with Richmond Residential and take the next step towards buying your first home with greater clarity and confidence.