First Home Buyers Assistance Scheme
As a first home buyer, you have the benefit of a full or partial exemption on transfer duty (formerly known as stamp duty). This is a government tax on property title transfers that needs to be paid within three months of signing a contract for sale or title transfer.
However, with an off-the-plan purchase, you can defer your transfer duty payment for up to 12 months after the contract is signed. Otherwise, the payment can be deferred until the property is completed or handed over, whichever comes first.
Requirements for a full or partial exemption on stamp duty
Stamp duty (or transfer duty) may have a full or partial exemption for first home buyers in Australia. The exemptions apply to vacant land on which you intend to build your new home, new and existing homes. You must apply for a partial or full stamp duty exemption in order to receive the benefit.
See NSW Government First Home Buyers Assistance Scheme for more details:
Stamp duty on New Homes
- Pay no stamp duty on first homes purchased under $800,000.
- Pay a concessional stamp duty rate based on the value of the home if it valued between $800,000 and $1,000,000.
Stamp duty on Existing Homes
- Pay no stamp duty on first homes purchased under $650,000.
- Pay a concessional stamp duty rate based on the value of the home if it valued between $650,000 and $800,000.
Stamp duty on Vacant Land on which you intend to build your first home
- Pay no stamp duty on land purchased under $400,000.
- Pay a concessional stamp duty rate based on the value of the land if it valued between $400,000 and $500,000.
Working out how much you can afford
Determining how much you can afford to buy a property for can be quite difficult. Especially when there are so many processes involved. In addition to your mortgage repayments, you may also have to take into consideration:
- Mortgage Insurance
If the deposit on your mortgage is less than 20%, you’ll be paying for lender’s mortgage insurance. This is a one-off payment to cover the lender should you default on the loan. The insurance may vary however you can expect to pay upwards of $12,000
- Loan application fees
Sometimes this fee can be waived by the lender. The fee may range between $0 to over $1000.
- Independent valuer fees
You may have to get an independent valuer to determine the value of the property you are looking to purchase. Your mortgage lender will estimate the property value but they are concerned that if you are unable to repay the loan, that they will be able to recover their money. Sometimes the bank will organise an independent valuer otherwise it may cost you between $300 and $500 for an independent property valuation.
- Legal fees
Depending on the complexity of the contract of sale, you may need to pay legal fees to understand and overcome any legal barriers.
- Stamp Duty (now known as Transfer Duty)
Most Australians know transfer duty by its original name: Stamp Duty. It’s an ugly phrase as this tax on property title transfers can really throw your numbers out. The cost can be up to 5.5% on the total value of the property. Fortunately, for first home buyers, there are full and partial exemptions to this tax. (LINK/SCROLL TO STAMP DUTY SECTION)
Stamp duty rates based on the property’s value.
|Property value||Transfer duty rate|
|$0 to $14,000||$1.25 for every $100 (the minimum is $10)|
|$14,000 to $31,000||$175 plus $1.50 for every $100 over $14,000|
|$31,000 to $83,000||$430 plus $1.75 for every $100 over $31,000|
|$83,000 to $310,000||$1,340 plus $3.50 for every $100 over $83,000|
|$310,000 to $1,033,000||$9,285 plus $4.50 for every $100 over $310,000|
|Over $1,033,000||$41,820 plus $5.50 for every $100 over $1,033,000|
- Land Registry Services
A NSW state government requirement to register the land title with NSW Land Registry Services. It will cost you approximately $150.
- Council Rates or Strata fees
Council rates or strata fees will commence from the settlement date and you should account for those. Council rates shouldn’t exceed $500 and strata will vary greatly depending on the building (usually around $800). Know what the cost is and when to expect them.
- Building, Pest and Strata Inspections
An important report to get when you are making a big investment decision. A Building and Pest Inspection will tell you more about the structure on the property and will identify any issues with pests. This includes any issues or threats associated with termites and any termite damage to the structure.
On the other hand, a Strata Inspection Report provides more details about the property you are buying including any damage to the building’s structure. A repair to an apartment building may be extremely costly and can be a cost passed onto the property owners in the building so make sure if a property you’re interested in has strata, you should get a Strata Inspection Report.
A Building and Pest Inspection will generally cost you between $450 and $600. Also, a Strata Inspection Report may cost you upwards of $300. Whilst they might be a lot of money, it’s better to understand the property
- Solicitor or Conveyancer fees
A solicitor or a conveyancer will guide you throughout the settlement process to ensure you fulfil all your legal obligations and meet deadlines. A solicitor may be required if the property purchase is complicated and requires court attendance. However, a conveyancer specialises in property ownership title transfers and can guide you through seamlessly. The best news is that a conveyancer will usually charge a fixed fee and will be significantly cheaper than a solicitor. Read more about the difference between solicitors and conveyancers. (See: Solicitor vs. Conveyancer All differences explained)
- Late payment fees
All these costs have deadlines so make sure that they are paid otherwise it can cost you significantly more. Additionally, failing to meet certain payments on time could cost you the potential to purchase the property and your deposit.
All these costs do add up so it is important to understand them all, how much they are and when they are due. You do not want to incur any late payment fees. A conveyancer will be able to assist you with all the fees and legal obligations through a property sale.
As mentioned earlier, failing to fulfil your legal obligations could cost thousands more including forfeiting your 10% deposit on a property. When you choose to work with a conveyancer, you’re working with an expert that knows the process back-to-front.