Hidden costs that make NSW home buyers pay double

Alarming new analysis has revealed the “true costs” of home ownership after numerous hidden expenses are factored in - and it’s much higher than you might think.

They’re already paying some of the highest prices in the world but the average NSW home buyer will actually have to shell out double the sticker price of their property to own it outright.

Alarming new analysis has revealed the “true costs” of home ownership over the course of a 30-year mortgage, with interest, taxes and other expenses adding large sums to the overall charge.

These additional costs were usually about the same as the price written on the contract of sale, with the trend remaining fairly consistent across price points.

Someone buying a house at the city median of $1.32m would need to fork out a total of about $2,659,000 if using a 20 per cent deposit and an average loan rate, the Finder.com.au research showed.

Rouse Hill resident Rhiannon Kenyon bought her first home within an apartment complex this year but was surprised by the added costs.

Finder head of consumer research Graham Cooke said few people appreciated the scale of the deal they were signing up for with home purchases.

“A lot of people don’t even factor in stamp duty,” Mr Cooke said, noting that homeownership expenses were far more than just the price and bank charges.

Stamp duty would add $57,000 to the total cost of a median property purchase, while home insurance over 30 years would be nearly $224,000.

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Other, auxiliary costs would be about $326,000 and council rates would add up to nearly $45,000 over 30 years if charged at the NSW average, according to Finder.

Then there were the interest payments. This expense alone added just over $1m to the total cost of homeownership on an average priced property.

The trend of home buyers paying nearly double their purchase price over the life of their loan occurred across most of the market.

Someone with a $500,000 property could expect to pay $1.03m over 30 years, a $750,000 property would cost $1.52m and a $2m house would cost $4.01m, Finder revealed.

Mortgage Choice broker Michael Seliba said many first homebuyers were likely being stumped with even higher expenses because they “rarely had a 20 per cent deposit”.

Using smaller deposits meant paying more interest over the life of the loan, along with lender’s mortgage insurance, Mr Selibas said.

First homebuyers were also more likely to purchase fixer uppers.

Property tax is a massive contributor to the total cost of homeownership. It also increases the prices of new builds.

“Most of the properties that are up for sale at the moment need work,” Mr Selibas said.

“It’s often the case that first homebuyers use a smaller deposit because they need to keep some of their cash for a renovation.”

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The true costs of owning a home were often a shock for new buyers, Ms Selibas added.

“Half of the people don’t look that far into it,” he said. “They tend to overpay on the purchase and it’s only then that those costs come into play.

“Others know the costs, but they say ‘it is what it is, we have to live somewhere’. They see it as worth it to be in control of their own place and not be renting.”

Rouse Hill resident Rhiannon Kenyon bought her first home earlier this year and said it was hard to factor in the longer term costs while hunting around for a property.

“Owning my home has been a goal of mine. At the beginning, it was all about the immediate gratification of getting something and if we had the upfront costs to buy,” she said.

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“The rest of it came into focus shortly after. We started receiving council bills, strata fees. It was a big jump from renting. And I hadn’t expected it to be quite this big.”