South Australians are increasingly hitting up their lenders to cover their stamp duty to enable them to enter the market – and it means in the long run they’re paying more than anyone else in the nation.
New research from money.com.au shows 46 per cent of all Australian buyers also borrowed their stamp duty payment, with 28 per cent increased their home loan to cover all upfront costs, including stamp duty, conveyancing and settlement-related fees.
In a blow for South Aussies, those looking to roll their upfront costs into their loan facing the highest overall costs of any buyers in the country.
Based on the median dwelling value of $916,000, Adelaide homebuyers face the highest overall cost, stamp duty comes in at $53,347.
Over the life of the loan, this adds $108,923 to the cost of the home.
Buyers purchasing in regional SA – where the median dwelling price is $495,000 – and whacking an extra $26,059 onto their loan for stamp duty will pay an extra $53,207 over its 30 years.
The next closest was Sydney, where stamp duty on a $1.237m property is $50,788, or $103,698 if added to a 30-year loan.
Debbie Hays – Money.com.au mortgage expert. Picture: Supplied
Money.com.au’s Mortgage Expert, Debbie Hays, if you’re a first homebuyer who doesn’t qualify for an exemption, stamp duty and buying fees can feel like paying a second deposit. “Many of those young buyers then roll those taxes and fees into their mortgage and take on a bigger debt than they originally planned,” she says.
“The real sting in the tail is you’ll pay interest on that extra amount over a 30-year term, because stamp duty and fees become part of your loan balance.”
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“Sometimes financing those upfront costs is the only way people can buy a home, but buyers should have a plan to reduce the interest, like using an offset account or redraw.”
She said investors view rolling upfront buying costs into the loan differently.
“For investors, rolling stamp duty and upfront costs into the loan is a strategic play. In most cases, the extra interest on the loan is tax-deductible,” she said.
Ray White chief economist Nerida Conisbee
Ray White Group chief economist Nerida Conisbee said stamp duty costs affected the speed of a market.
“Taxation and government policy can move volumes quickly,” she said.
“Changes to stamp duty, land tax, capital gains tax or investor incentives all alter the financial equation for buyers and sellers.
“These shifts can bring forward transactions or cause them to be delayed, leading to short term spikes and troughs in sales.”
First-home buyers Claudia Grentell and Tristan Thomson had been looking for more than six months before deciding to bundle stamp duty fees into their home loan to get into the property market sooner.
“As first home buyers, this is what we were advised to do if we wanted to buy,” she said.
“Because we were using a guarantor, our broker explained we could add some of the upfront costs to the loan if we wanted to keep extra cash aside,” Ms Grentell said.
Claudia Grentell with her two children Micah, 5, and Maisie, 2. Claudia and her partner bought their house in November and borrowed extra money to cover stamp duty and other costs with the purchase. Picture: Nigel Hallett
Being able to buy, Ms Grentell said, put an end to the family’s weekend run-around at open homes.
For Bronte Miller, 28, long-term renting seemed like it going to be her reality.
But that all changed when she signed the contract on her new home through a HomeStart Loan that covers her upfront costs.
While she is exempt from paying stamp duty, the seven-year, no interest loan covers other upfront expenses, allowing her to get into home ownership sooner.
“I’d been looking for about two years before I found this one,” she said.
“I always thought I was going to be renting, but I feel really fortunate that this time next year I’ll have my own home.
Bronte Miller has bought through HomeStart, with her loan covering the upfront costs that come with buying. Pic RoyVPhotography
“I’m lucky that my expenses are covered through the loan, and the stamp duty exemption I’m eligible for, because without it I don’t think I would have been able to do it – that’s a lot of extra money you need upfront.
“I don’t think people think about how much they end up paying over all when they borrow that extra money to cover those costs, because it can be quite confusing.”
HomeStart CEO Andrew Mills said homebuyers had it tough.
HomeStart chief executive officer Andrew Mills
“Saving for a home is challenging, especially when upfront costs are added on top of a deposit,” he said.
“Our $10,000 Starter Loan helps ease that pressure and gives more South Australians the chance to buy or build their own home.”
– with Aleisha Dawson
English (US) · 