Paying double: The shock true cost of owning a home in Victoria

Victoria is the most expensive place in Australia to own a home, with shock research revealing the true cost of making your home your own is far more than the number on the sold sticker.

An Nguyen and Adam Patterson delayed having their four-month-old bub Oscar until they had built a sizeable buffer for their mortgage and are on track to avoid paying double for their home. Picture: Tim Carrafa.

Victoria is the most expensive place in Australia to own your home outright, with the true cost more than double the sticker price and first-home buyers hit hardest.

New research from Finder has found that by the time a homeowner pays out a 30 year mortgage, covers stamp duty costs, council rates, and building insurance, the $890,000 median Melbourne house price soars to $1,848,980.

With Victoria home to the nation’s highest stamp duty, it is also the nation’s priciest place to own a home dollar for dollar, as buying a home of the same value in Queensland would cost a few thousands less in Queensland and tens of thousands less in NSW.

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The figures do not include variable costs of ownership such as repairs and owners corporation fees, or acquisition costs like conveyancing and building or pest inspections, and assumed interest payments at an average 6.22 per cent with a 20 per cent deposit.

Comparison website Finder head of consumer research Graham Cooke said he didn’t think anyone really appreciated the scale of the deal they were signing up for with a home purchase.

But the system hits young buyers hardest, with many first-home buyers purchasing a home without saving a 20 per cent deposit, in a move Mr Cooke said was “a terrible idea”.

Finder’s research showed buying even a $500,000 home with a 10 per cent deposit instead of 20 per cent would cost about $110,000 extra in mortgage payments – more than a fifth again of the purchase price.

The true cost of owning a home in Victoria.

But Amy Lunardi Property founder Amy Lunardi said first-home buyers faced a dilemma.

“It’s really a catch-22 for first-home buyers, the more deposit they have the more equity they have — but the longer they take to save,” Ms Lunardi said.

“So they have to calculate what is it costing in the meantime with rent and the cost of buying the home potentially rising. It can be an unattainable goal for many first-home buyers to save a 20 per cent deposit.”

NAB home ownership executive Andy Kerr said paying an extra $80 every month on a $500,000 mortgage via an offset account or redraw facility at the moment would save a homeowner $41,649 in interest across the life of the loan.

3 Silvertop Street, Frankston North is for sale via OBrien Real Estate for $500,000-$550,000 — but keeping that price from doubling will take financial discipline from its next owner.

Mr Kerr said more than half of NAB customers had only fixed part of their loan during the ultra-low interest rates of 2020 and 2021, leaving the rest variable so they could make additional payments.

As a result, last year the nation’s third biggest lender’s customers had $30bn in offset accounts and two thirds were currently ahead of their repayments by an average of 3.5 years.

Mortgage Choice broker David Thurmond said the “ugly number” of what buying a home truly cost didn’t stop many from breaking into the housing market.

Aside from minimising the initial loan size, Mr Thurmond said the best way to shave years and potentially hundreds of thousands of dollars from a mortgage was to pay more often.

He said that making repayments weekly instead of monthly could take more than six years off of a 30 year loan.

Nelson Alexander have 33 Rotherwood Road, Ivanhoe East, listed for $2m-$2.2m — but if the next owner takes 30 years to pay that off it could easily cost more than $4.4m.

Mr Thurmond seconded Mr Kerr’s suggestion of putting extra money onto your mortgage and

added that older borrowers might not be aware fees and extra charges for outpacing a mortgage had mostly been removed across the banking industry in 2016.

“You want your money working for you while you are sleeping,” he said.

However, Mr Cooke warned fixed rate loans were still typically subject to an annual cap on excess payments of about $10,000 with hefty fees applicable for going past this.

While those who fixed a year or two ago were generally in the best position today and could put money into savings for when their loan swapped to a variable rate, he advised evaluating a loan at least annually on a comparison website to see if there were better deals.

“A lot of people put that into the too hard basket, but that figure really is the most costly thing in your life,” he said.

22 Erinne Court, St Helena is for sale via Barry Plant for $1.5m-$1.65m, but homes listed at this price could easily top $3m in the long run if buyers don’t think ahead.

His final tip to cut the cost of owning a home was to shop around for insurance, with the average cost of keeping your bricks and mortar covered for mishaps worth anywhere from $1500 to $2100 a year depending what state you lived in according to Finder.

HOW WE’RE AVOIDING PAYING DOUBLE

For An Nguyen and Adam Patterson getting ahead of their first mortgage has been a tactical process that started long before they bought a home.

Ms Nguyen said their pre-mortgage prep had included everything from paying off all their credit cards and car loans to seeking out government assistance and borrowing some money from their parents to reach a 20 per cent deposit for their Reservoir first home.

“Receiving financial assistance from our parents helped us reach the 20 per cent deposit and saved us from lenders’ mortgage insurance,” she said. “We saved over 10 per cent but were unable to save at the same pace as the rising housing market prices.”

An Nguyen, Adam Patterson and their four-month-old bub Oscar, have a long-term strategy to staying ahead of their mortgage. Picture: Tim Carrafa.

With the family loan boosting their buying power without incurring ongoing interest charges, they started ahead of many other first-home buyers.

“And our mortgage broker helped us plan financially,” Ms Nguyen said.

“They helped find the best mortgage interest rates and budget in the event of interest rates rising to 9 per cent.”

Even after buying their home they kept on saving, ensuring they had a buffer before having their now four-month-old first child, Oscar.

They still don’t own a credit card, pay their mortgage weekly rather than monthly, invest in efficient appliances and have added solar panels to cut their energy bills.

“We look for sales and buy second hand where practicable,” Ms Nguyen added.

And she said most of their efforts could be replicated by others with or about to have a home loan.

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