Homebuyers rolling tax into their home loan are being slugged
A hidden first-home buyer trap is pushing young Queenslanders into bigger mortgages, with new research warning the true cost of rolling stamp duty and buying fees into a home loan can balloon into a near-$100,000 blow.
Money.com.au found 46 per cent of Aussie homebuyers increased their mortgage to cover transfer duty and other settlement-related costs, a move that could add tens of thousands in interest when those charges are repaid over 30 years.
In Brisbane alone, financing stamp duty was estimated to cost an additional $74,196, based on today’s average variable rate, or $50,707 for the rest of Queensland.
SOLD: $1.375m, 17 Darwin St, Aspley
The practice was most common among younger buyers, with 64 per cent of Gen Z homebuyers and 54 per cent of Millennials saying they borrowed extra to cover purchasing fees. By comparison, 39 per cent of Gen X buyers and 27 per cent of Baby Boomers did the same.
While Queensland’s first-home buyer concessions have expanded, buyers who miss the thresholds, are purchasing again, or have a partner who has owned before can still face a five-figure stamp duty bill, alongside other upfront costs.
Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella said stamp duty remained a significant barrier for many buyers, including young people as well as downsizers.
“Stamp duty costs in Queensland are calculated on a sliding scale depending on the value of the property. While most buyers are aware of stamp duty and attempt to budget for it, with property prices continuing to rise, the cost can still come as a shock and substantially delay or derail purchase plans,” Ms Mercorella said.
REIQ CEO Antonia Mercorella
Sydney and Melbourne buyers faced an even bigger hit at $103,698 and $98,451 respectively, the analysis showed.
The survey found 28 per cent of homebuyers increased their loan to cover all upfront costs including stamp duty, conveyancing and settlement-related fees, while 18 per cent increased their mortgage to cover stamp duty only.
Money.com.au mortgage expert Debbie Hays said stamp duty was often the single biggest upfront cost outside the deposit. She warned rolling those charges into a loan could come with a long-term sting.
SOLD: $3.155m, 9 Clyde Rd, Herston
“If you’re a first-home buyer who doesn’t qualify for an exemption, stamp duty and buying fees can feel like paying a second deposit,” Ms Hays said.
“Many of those young buyers then roll those taxes and fees into their mortgage and take on a bigger debt than they originally planned.”
Ms Hays said first-home buyer exemption thresholds had not kept pace with rising property prices, meaning many younger buyers were missing out on stamp duty relief and adding those costs into their mortgage.
The research found stamp duty could end up costing more than double its original amount once interest was factored in over a typical 30-year mortgage, based on a 30-year loan term at an average variable rate of 5.49 per cent.
Debbie Hays is Money.com.au’s mortgage expert. Picture: Supplied
In Queensland, stamp duty is waived for eligible first-home buyers for existing residences priced up to $700,000, while a concession applies for properties under $800,000. There is no price cap for new builds and vacant land.
Loan Market mortgage broker Cara Haynes said many buyers underestimated the upfront costs of purchasing, which included not only stamp duty but also mortgage transfer and registration, solicitor fees, building and pest inspections, home insurance and, in some cases, lenders mortgage insurance (LMI).
“In the current market, even the average apartment price in much higher than [$700,000], meaning it is difficult to find a property that would have stamp duty entirely waived,” Ms Haynes said.
SOLD: $1.5m, 7 Harlow Pl, McDowall
MORE NEWS
Where Brisbane, Gold Coast homebuyers are
‘FOMO tax’: Huge mistakes being made by reckless buyers
Bombshell blow to rates after sizzling wages, jobs data
Buyers with a higher LVR were likely to feel the squeeze with any interest rate rises, and may be required to pay LMI if they have less than a 20 per cent deposit, Ms Haynes said.
“Many young buyers are rightfully concerned about being priced out of the market,” she said.
Ms Mercorella called for stamp duty to be abolished across all property transactions and replaced with a broad-based land tax.
Ms Hays said buyers who chose to finance upfront costs should have a plan to reduce the interest hit.
“Sometimes financing those upfront costs is the only way people can buy a home,” she said.
“But buyers should have a plan to reduce the interest, like using an offset account or redraw.”
Loan Market broker Cara Haynes
English (US) · 