What are the extra costs involved when buying a house?

One way to reduce some of the stress of finding and owning your first home, or moving up to your next home, is to plan ahead for the extra costs involved. That way there’ll be less chance of nasty surprises that blow your budget and ruin the fun.

Everyone has their eye on mortgage repayments, but there are other expenses to also consider. Some start before you’ve even bought a home, while others are simply part of moving in. And then there are the ongoing costs of owning the home and making it yours.

The costs of finding a house to buy

Flicking through the latest house ads and touring the open homes can be great free entertainment. But once you find a place you’d like to own, the inspections and checks associated with due diligence start to mount up. If you’re negotiating to buy, you can usually make your offer subject to satisfactory outcomes from each inspection or check. That way you can agree on a sale price before spending money on them. However, your conditions might reduce the appeal of your offer. If you’re buying at auction, which is typically an unconditional sale, it’s smart to get your due diligence list ticked off before you raise your hand to bid.

What does a house inspection cost?

Given the cost of a new home, getting a pre-purchase builder’s inspection is almost a must. There are bound to be some things that will need attention, but at least you’ll know what they are. That means you can negotiate on the price or adjust your budget to get issues fixed before they turn into major problems.

A builder’s inspection can cost anywhere between $400 and $1,000+. It just depends on the property and how long it will take. Being onsite during the inspection can help you understand any issues, but it will usually cost more because of the extra time involved. These days building inspections can also include a meth test, to ensure the property is free from methamphetamine contamination caused by meth users and/or manufacturers.

Vendors or their agents sometimes provide a builder’s report as part of the house sale information. While this might be useful as an initial guide, it’s usually recommended that you get your own. If the report misses something, you probably won’t have any comeback unless you’re the one paying the inspector.

What is a LIM and what does it cost?
A land information memorandum (LIM) is a summary of key information the council has about a property. It will show what work has a council consent, rates information and whether there are any known problems with the land, such as potential flooding or instability. A LIM typically costs around $350, or a little more if you need it urgently. LIMs are updated over time, so if the vendor is offering a copy, be sure to check it’s recent. You can also pay for a copy of the council’s property file, which will include more information.
How much does a lawyer cost when you’re buying a house?

There’s a lot of legal paperwork involved, so it’s important to get a lawyer or conveyancer involved. The earlier you do this the better, even if it’s just to let them know your plans. They may be able to give you some handy tips. It’s important that your lawyer approves and explains any agreement before you sign it. If you decide to make an offer without first consulting your lawyer, you should at least make it subject to your lawyer approving the sale and purchase agreement.

A very basic service of checking the property title, handling the legal title transfer and arranging settlement of funds from your mortgage lender to the seller will typically cost at least $1,000. More complex sales and greater legal advice can see legal expenses of much more, so be sure to get an estimate and description of proposed services before engaging your lawyer.

How much is a registered valuation for a house?

Apart from helping you to confidently make an offer or bid on a property, a registered valuation is usually required by your mortgage lender. The amount they’re prepared to lend will depend on the valuation. If you don’t manage to get it done before you sign a sale and purchase agreement, you can make your offer subject to a suitable registered valuation and finance approval. If you’re buying at auction, you’ll need to have a valuation and approved finance before you bid.

Your mortgage provider may arrange a valuation for you and who pays the fee may be negotiable. The average price for a valuation is around $1,000. More expensive homes tend to have a higher valuation fee.

The costs of moving into a new home

Once you’ve successfully purchased a new home, the next round of costs typically arrive on or near the day you move in. Here are a few of the main expenses:

Furniture removal costs

The cost of moving furniture can vary widely. If you need a moving company, most will be happy to give you a quote, so shopping around ahead of time is definitely a good idea. However you plan to move your belongings, be sure to check your insurance cover for road accidents and damage while packing, unpacking and in transit.

Commercial cleaning cost when moving house
Cleaning curtains and carpets while a new house is empty often makes sense. Many rental agreements also include a commercial clean as part of a tenant’s leaving requirements. Depending on what your vendors have done, you may need to budget for two house cleans.
Security and locksmith
Although the seller will leave you keys, you may prefer to get the locks changed for added peace of mind. If the home has a monitored alarm, you may need to factor in a technician to switch it over to your preferred supplier.
Mail redirection
Getting your mail redirected from your old address to your new one, will help to ensure important bills and notices still reach you. If you organise it online, household mail redirection ranges from $21 for two months to $78 for a year. Mail that gets redirected to you will help you identify the organisations you forgot to update with your new address.
Additional furniture and appliances
While you don’t have to launch into interior decorator mode from day one, or even fully furnish your new home, there may be some essentials you should budget for. Depending on what you already have, these might include a fridge, washing machine or a vacuum cleaner. Buying second-hand to begin with can help you get through the initial period of one-off costs until your future budget settles in.

The ongoing costs of owning a home

Obviously there’s more to owning a home than meeting the mortgage repayments, so here a few of the regular expenses to include in your budget planning:
Additional furniture and appliances
Obviously there’s more to owning a home than meeting the mortgage repayments, so here a few of the regular expenses to include in your budget planning:

Before they let you draw down the money to pay for your new home, your mortgage provider will probably want to see evidence that you’ve arranged house insurance from the settlement day onwards. It’s a good idea to get this sorted early as insurers can require electrical inspections and other details, particularly for older homes. As a rough guide, the average home and contents insurance cost is about $2,000 a year. It’s easy to get a quote and many insurers let you do this online. You could also consider mortgage repayment insurance. For more on house and contents insurance see our other information website, insurances.co.nz.

Council rates
The annual rates for your new home will probably be detailed in the sales information pack, or you can look them up online. As part of the settlement process, your lawyer will arrange for you to repay the vendors for a portion of the rates they’ve already paid in advance. In our major cities, council rates can be thousands of dollars a year.
Body corporate fees
If you buy an apartment or townhouse on shared land you’ll probably have to pay an annual fee for shared maintenance and insurance. Before you buy, you should also get your lawyer to look into the financial state of the body corporate and its recent correspondence, in case a significant one-off fee may be required in the near future to cover urgent or major repairs.
Mortgage repayments

You’ll definitely have these on your radar. Be sure to allow for the possibility of interest rates rising. Mortgage lenders will typically use a higher rate when working out what you can afford. To explore the repayments on different mortgage arrangements, see our handy mortgage repayments calculator.

Building maintenance
This will usually be minimal for a new-built home, but can be quite considerable for an older wooden property. Regular cleaning and maintenance is important to stop things turning into really expensive problems. Talk to people who have owned similar homes to get an idea of how much they spend. It’s a good idea to start a maintenance bank account and put money aside regularly, so the money is on hand when you need to repaint or replace the roof.
Landscape maintenance
While it’s likely you can handle basic garden maintenance yourself, there may be times when you need to call in the tree trimmers. Always get two or three quotes before committing, because prices can vary significantly. If gardening isn’t your strong point, factor in the cost of a regular gardener to keep your landscape in good shape.
Home improvements
Very few homes are perfect and people’s needs change, particularly when they start a family. Chances are you’ll want to get some renovations done or upgrade your furniture in the future. While it’s definitely a good idea to repay your mortgage as fast as you can, you may also want to start saving for some value-adding home improvements.
To learn more:

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice from someone who is authorised to provide financial advice.

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