The Hidden Costs of Buying a Home in Australia
Most first-home buyers budget for the deposit and forget everything else. In reality, the upfront costs of purchasing a property in Australia typically add 3–6% to the purchase price on top of your deposit. On a $750,000 property, that means $22,500–$45,000 in additional costs that must be in cash — they cannot be borrowed. Understanding every line item before you bid is the difference between a clean settlement and a scramble for bridging finance.
Stamp duty is the single largest variable cost, and it differs dramatically by state. In NSW, the duty on a $750,000 property is $28,335. Victoria charges $40,070 on the same price — the highest rate in the country. Queensland applies $24,525. These figures assume you don't qualify for a first home buyer concession, which can reduce or eliminate duty entirely below certain thresholds (e.g. $600,000 in NSW, $600,000 in VIC for first homes). Always model the concession before assuming full duty applies.
Lenders Mortgage Insurance (LMI) is triggered whenever your loan-to-value ratio (LVR) exceeds 80% — meaning your deposit is less than 20% of the purchase price. On a $750,000 property with a 10% deposit ($75,000), LMI typically runs $14,000–$22,000 depending on the lender and LVR. LMI protects the lender, not you, but it is capitalised into the loan — meaning you pay interest on it for 30 years. It can be avoided entirely by saving a 20% deposit, using a guarantor, or qualifying for a government guarantee scheme such as the Home Guarantee Scheme (up to 5% deposit, no LMI, income caps apply).
Frequently Asked Questions
Can I include stamp duty in my home loan?
No — stamp duty must be paid in cash at settlement and cannot be included in your mortgage. This catches many first buyers off guard: you need both the deposit (minimum 5–20% of purchase price) and stamp duty in liquid funds. Some states offer deferral arrangements for eligible buyers, but these still create a debt that must be repaid. In NSW, the First Home Buyer Choice scheme lets eligible buyers opt for an annual property tax instead of upfront stamp duty, which can free up significant cash — but increases holding costs over time. Consult a solicitor or conveyancer about which option suits your situation.
Who qualifies for the First Home Owner Grant (FHOG)?
FHOG eligibility varies by state but generally requires: you must be purchasing a newly built home or building a home (not established dwellings in most states), you must be an Australian citizen or permanent resident, you must not have previously owned property in Australia, you must intend to live in the property as your primary residence for at least 12 months, and the property value must fall below the state threshold (e.g. $750,000 in NSW and VIC, $750,000 in QLD). Grant amounts are typically $10,000 in NSW and VIC, and $30,000 in QLD (boosted for regional builds). The grant does not reduce stamp duty — it is a separate cash payment from the relevant state revenue office.
Is LMI tax deductible?
LMI is deductible only if the loan is for an investment property, not your primary residence. For investment properties, LMI is treated as a borrowing cost and deductible over 5 years or the loan term (whichever is shorter), under Section 25-25 of the ITAA 1997. For an owner-occupied purchase, LMI is not deductible at any point. If you later convert your home to an investment property, LMI already paid cannot be retrospectively claimed. This is a material consideration when weighing whether to pay LMI now versus saving a larger deposit — the deductibility changes the after-tax cost significantly for investors.
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Model Repayments →ASIC Disclaimer: Stamp duty figures are estimates based on published state revenue office rates. LMI estimates vary by lender. All figures should be confirmed with a licensed conveyancer, mortgage broker, or legal adviser before exchange of contracts.