Other than the price of the actual property (that one is a given), Stamp Duty is probably the biggest cost you will need to budget for when buying a house. And, if buying houses isn’t something you are all that familiar with, Stamp Duty may come as a bit of a shock. You think you have your budget all figured out and you have a list of dream homes you think you can afford then suddenly …. BAM …. Stamp Duty! And in the blink of an eye what you thought your budget was is now considerably less OR you have less in the tank to do all the renovations you had your heart set on.
My helpful hint for the day:
BEFORE you start your initial house hunting (based on what you think you can afford) talk to a financial adviser or mortgage broker. Their services are usually no-obligation and there is no initial cost to you. They are an invaluable source of information, they will be able to give you an accurate estimate of your borrowing capacity (what the banks will lend you based on your current financial position rather than what you think you can afford – these 2 figures are generally worlds apart from each other and can lead to disappointment down the line if you haven’t done your research).
BUT, I am supposed to be discussing Stamp Duty so I’ll get back on track. I found an informative article on homesales.com.au that explains Stamp Duty fairly simply. Have a read below …
Also called transfer duty, stamp duty is a tax on property by Australian state and territory governments, paid at settlement or shortly after, when ownership of a property is transferred.
The amount of stamp duty you’ll pay varies depending on the state in which the property is bought but in general the more expensive the house, the more you’ll pay in stamp duty.
Who has to pay stamp duty?
Most people will have to pay stamp duty tax when they buy a residential or investment property unless you’re a first home buyer or qualify for an exemption.
In NSW the ‘First Home – New Home’ scheme offers full exemptions on new homes for first home buyers up to $650,000 and stamp duty relief for homes up to $800,000
- New South Wales government first home buyers
Exemptions from stamp duty can also apply for subsequent home buyers in cases such as: transferring ownership of a property to a spouse or distributing the property of a deceased person’s estate. Again, this depends on the state and their regulations.
Where does your Stamp Duty go?
Stamp duty can be expensive, but on a positive note you do get to see the benefits of it. The money gets added to the state budget for things such as transport and roads, health and hospitals, emergency services, police and other essential services that help to keep the state running.
How much is stamp duty?
Knowing in advance how much you’ll need to pay for stamp duty can alleviate some of the stress come settlement day. It’s a good idea to jump online and use a stamp duty calculator to get a rough idea of how much you’ll be paying on a specific purchase price.
For example, here’s what you’ll pay in NSW for different prices if you intend to live in the house and you’re not a first time home buyer:
- A $250,000 home will cost you $7,240 in stamp duty
- A $500,000 home will cost you $17,990 in stamp duty
- An $800,000 home will cost you $31,490 in stamp duty
As a general rule of thumb, you should budget for stamp duty to cost around 4% of the purchase price of the property.
Other costs you may not have considered
While we are on the subject of surprise costs when purchasing a house. Here is a quick list of some costs that are often overlooked
- Conveyancing and legal fees
- Pest and building inspections
- Mortgage registration and transfer fees
- Loan application and establishment fees
- Early exit fees if you need to sell before you buy
- Mortgage insurance
- Council / water rates, and utility set up fees
- Removalist costs
- Repairs and renovations
For more information on the above items, check out the article on realestate.com.au
Source: www.homesales.com.au read the full article here