The Hidden Costs of Buying Your First Home Beyond the Deposit

Your home deposit is only one part of the money you may need to buy your first property. Other costs can arise while you are searching, when you sign a contract, at settlement, during the move and throughout your first year as an owner.

The expensive surprises are not always the biggest items. They are often the costs that arrive earlier than expected, need to be paid in cash, or occur more than once.

A practical first-home budget should therefore answer two questions:

1. What will the purchase cost in total?
2. When will each amount need to be available?

This guide follows the “cost clock” from property search to the end of your first year, helping you build a cash-flow plan rather than a single deposit target.

The first-home cost clock at a glance

If you are still working out your deposit pathway, start with Falcon’s broader guide to how much money you need to buy your first home. This article goes deeper into the non-deposit costs and their timing.

Stage 1: Costs before you have bought anything

Contract reviews and legal advice

A solicitor or conveyancer can review the contract, explain special conditions, identify title or planning issues and help you understand deadlines before you sign or bid.

The legal fee is easy to treat as a settlement cost. In reality, part of it may arise earlier, and you may seek advice on more than one property. Ask what the quote includes, what triggers an extra fee and whether an unsuccessful purchase is billed differently.

Building and pest inspections

A building inspection can identify defects, safety concerns, damp and likely repair issues. A pest inspection can identify termite activity and other pest risks. These reports may protect you from a much larger future cost, but the report fee is usually paid whether or not you proceed.

Buyers attending auctions can face this expense repeatedly. In most Australian jurisdictions, the successful auction bid creates an unconditional contract and there is no cooling-off period. The due diligence may therefore need to happen before the auction.

Moneysmart recommends using a professional for building and pest reports and getting the contract reviewed before signing. The exact process and protections differ across states and territories, so follow your conveyancer’s advice.

Strata reports and specialist checks

If you are buying an apartment, townhouse or another strata property, the condition of your unit is only part of the risk. A strata report can reveal the scheme’s finances, insurance, planned works, defects, disputes, legal matters and meeting history.

Check the regular levies, capital works fund and any current or proposed special levies. A low quarterly levy is not automatically a bargain if the scheme has underfunded major maintenance.

Other properties may justify specialist reports for flooding, bushfire exposure, boundaries, plumbing, electrical systems, pools or unapproved structures. Your legal adviser and building inspector can help identify checks relevant to the property.

The cost of an unsuccessful search

A first-home budget often assumes one contract review and one inspection. A competitive search may involve several.

Create a separate “property search” allowance that can cover due diligence on multiple homes without reducing the money reserved for settlement. Deciding not to buy after discovering a problem is not wasted money; it is the inspection doing its job.

Stage 2: Costs between contract and settlement

Transfer duty—or stamp duty

Transfer duty is a state or territory tax generally based on the property’s dutiable value. It can be one of the largest purchase costs after the deposit.

First home buyer exemptions and concessions may reduce it, but the rules vary by location, property value, property type, residency and occupancy. Eligibility is not automatic simply because this is your first purchase.

Use the calculator from the relevant state or territory revenue office and ask your conveyancer to confirm the amount for the actual contract. Do not base the budget on a threshold remembered from an old article or a friend’s purchase.

For example, Revenue NSW currently provides a full exemption for eligible first home buyers purchasing a new or existing home with a dutiable value of $800,000 or less, and a concession above $800,000 and below $1 million. Those NSW settings do not apply elsewhere and can change.

Conveyancing, searches and disbursements

Your solicitor or conveyancer’s invoice can include professional fees plus third-party disbursements. These may cover title searches, certificates, electronic settlement charges and other enquiries.

Compare quotes on an inclusive basis. A low headline fee can be misleading if common searches, contract reviews or settlement work are charged separately.

Loan, valuation and registration costs

Depending on the lender and loan, possible costs include an application or establishment fee, valuation fee, settlement fee, package fee and government mortgage-registration charges.

Some lenders waive particular fees, while others bundle them into an annual package. The cheapest upfront option is not always the cheapest loan over time, so compare the rate, fees, features and likely holding period together.

Lenders mortgage insurance

If you borrow above a lender’s preferred LVR and are not using an eligible guarantee or exemption, lenders mortgage insurance may apply. LMI protects the lender, not you.

The premium may be payable from your funds or added to the loan if permitted. Adding it reduces the immediate cash requirement, but increases the amount borrowed and can affect the final LVR. Confirm the treatment before calculating the funds needed at settlement.

Settlement adjustments

Property expenses do not align neatly with the day you receive the keys. Council rates, water charges, strata levies, rent and other amounts may have been paid in advance or may remain due.

Your conveyancer generally prepares settlement adjustments so the buyer and seller each bear the appropriate share under the contract and local rules. An adjustment can increase or decrease the amount needed on settlement day. It is not necessarily a new fee, but it changes the cash you must have ready.

The valuation shortfall

A lender may value the property below your agreed purchase price. Because the loan is usually calculated against the lender’s accepted value, this can create an immediate cash gap.

Suppose you agree to pay $800,000 but the lender accepts a value of $770,000. Even if your loan was planned around a 10% contribution, the lender may base its maximum on $770,000 rather than $800,000. You may need to contribute the difference, renegotiate where possible, change the structure or decide not to proceed if the contract allows.

This risk is especially important at auction or under an unconditional contract. Discuss valuation and finance risk before signing.

Stage 3: Costs around moving day

Building and contents insurance

Your lender will normally require acceptable building insurance for a house. The date from which the buyer bears risk can depend on the state, contract and purchase method, so ask your conveyancer when cover should begin rather than assuming settlement day.

For strata property, the owners corporation may insure the building. You may still need contents cover and protection for fixtures, improvements or liability not covered by the strata policy.

Insure for rebuilding and replacement costs, not the property’s market price. Moneysmart warns that underinsurance can leave an owner paying a substantial shortfall after a claim.

Moving, storage and overlapping housing costs

Removalists, truck hire, packing materials, storage and cleaning can add up. Rent may also overlap with the first mortgage repayment while notice periods, settlement timing and the move are coordinated.

Allow for delays. If settlement moves by several days, you may need temporary accommodation, extra storage or rescheduled services.

Utilities, internet and basic security

Budget for utility connections or account setup, internet installation and any required equipment. Changing locks, garage remotes or access codes can be a sensible early security expense.

Essential repairs and furnishing

It is easy to turn “move-in ready” into an expensive shopping list. Separate urgent work from cosmetic preferences.

• Urgent: safety issues, active leaks, electrical problems, broken locks or essential appliances.
• Soon: maintenance that prevents damage or improves basic function.
• Later: painting, styling, upgraded furniture and renovations that can wait.

Preserving cash after settlement is usually more valuable than furnishing every room immediately.

Stage 4: The first-year ownership costs

Council rates and water charges

Owners receive council and water charges that may be billed quarterly or annually. The format and responsibility for consumption and service charges vary by location.

Convert them into a monthly amount in your household budget, even if the actual bill arrives less frequently. This prevents a quarterly bill from feeling like an emergency.

Strata levies and special levies

Regular strata levies fund shared expenses and capital works. A special levy may be raised when existing funds are insufficient for major repairs, defects or unforeseen costs.

Review meeting minutes, financial statements, the capital works plan and known defects before buying. After settlement, build regular levies into the budget and retain capacity for increases.

Maintenance and repairs

There is no universal maintenance percentage that suits every home. A new apartment and an older detached house have different risks.

Create a repair reserve based on the property’s age, condition, construction, shared responsibilities and inspection findings. Contribute to it regularly rather than waiting for something to break.

Insurance renewals and changing cover needs

Insurance is an ongoing cost, not a one-off settlement item. Review the sum insured at renewal and after renovations or major purchases. Rebuilding costs can move differently from the property’s market value.

Land tax and property use

A principal residence is commonly exempt from land tax, but rules differ by state or territory and personal circumstances. Buying through a trust, owning other land, moving out or changing the property’s use can affect treatment. Check with the relevant revenue office or seek tax advice if your position is not straightforward.

House versus apartment: the hidden costs shift

Neither ownership type is automatically cheaper. Compare the likely total cost and risk, not just the current quarterly levy or the absence of one.

Build a cash-flow worksheet, not just a total

Use four separate buckets:

1. Property search fund: contract reviews, reports and auction due diligence.
2. Settlement fund: deposit balance, duty, legal work, loan costs, adjustments and any LMI paid in cash.
3. Moving fund: insurance, moving, connections, security and essential repairs.
4. Ownership buffer: emergency savings plus the first round of rates, levies, maintenance and insurance.

For each item, record:

• the estimated amount
• the source of the estimate or quote
• the due date
• whether it can be paid from the loan, a grant or cash
• a contingency amount.

Falcon’s home loan calculators can help model repayments. Add the non-mortgage ownership costs separately to see the fuller monthly position.

Five common first-home budgeting mistakes

1. Using every saved dollar as the deposit. This leaves no room for costs, a valuation gap or post-settlement emergencies.
2. Assuming a concession before checking eligibility. Property value, occupancy and personal criteria can change the result.
3. Budgeting for one inspection only. Due diligence can be repeated across several properties.
4. Ignoring quarterly and annual bills. Convert rates, levies and insurance to monthly amounts before testing affordability.
5. Equating lender approval with a complete budget. A lender’s assessment does not create your moving budget or repair reserve.

Borrowing capacity remains important, but it is only one part of readiness. Falcon’s guide to what affects home-loan borrowing capacity explains how lenders assess income, expenses and commitments.

Frequently asked questions

Can purchase costs be added to the home loan?

Some loan-related costs or LMI may be added where the lender permits and the final LVR remains acceptable. Transfer duty, conveyancing, reports and other costs often need to be covered from available funds. Confirm the structure before committing to a purchase.

Do first home buyers pay stamp duty?

It depends on the state or territory, the property value and type, and your eligibility for an exemption or concession. Some buyers pay none, some receive a reduction and others pay the standard amount.

How much should I keep after settlement?

There is no single amount for every buyer. Consider income stability, insurance excesses, the property’s condition, upcoming bills and the cost of essential repairs. A buffer should be deliberate rather than simply whatever remains.

Are strata levies included in mortgage repayments?

No. Strata levies are separate from the home loan and are generally paid to the owners corporation. They need to be included in your household budget alongside rates, utilities, insurance and maintenance.

When should building insurance start?

The point at which risk passes to the buyer varies by jurisdiction and contract. Ask your conveyancer and insurer when cover should begin. Do not assume the answer is always the settlement date.

Give every dollar a job before you make an offer

A strong first-home plan does more than reach a deposit percentage. It allows for due diligence, settlement, the move and the costs of actually owning the property.

Speak with Prasanth at Falcon Lending Solutions to map your available funds against the deposit, purchase costs and a sensible buffer. Falcon can help you test the loan and cash-flow position before you make an offer, with broader guidance available on the first home buyer service page.

General information only. This article does not take into account your objectives, financial situation or needs. Costs, concessions, taxes, legal requirements and lender policies vary and can change. Obtain current quotes and appropriate legal, tax, insurance and financial advice for your circumstances.

Sources and further reading

• Moneysmart — Buying a house
• NSW Government — Costs when buying a home
• NSW Government — Buying a strata property
• Revenue NSW — First Home Buyers Assistance Scheme overview
• Moneysmart — Underinsurance and how to avoid it