Imagine adding an extra $100,000 to your home loan without even realising it.
For millions of Australians, this isn’t a hypothetical nightmare; it’s a stark reality.
New research from Money.com.au reveals half of Australian homebuyers are increasing their home loans to cover government charges like stamp duty and other buying fees as a shortcut to enter the housing market.
Among this group, 28 per cent increased their home loan to cover all upfront costs, including stamp duty, conveyancing and settlement-related fees, while 18 per cent increased their loan to cover stamp duty only, which is often a five-figure sum.
The remaining 54 per cent of Aussie homebuyers paid all government fees and buying costs separately.
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Money.com.au’s mortgage expert, Debbie Hays, pulls no punches.
“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,” she explains.
“Many of those young buyers then roll those taxes and fees into their mortgage and take on a bigger debt than they originally planned.
“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.
“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.”
The shocking figures: Where your stamp duty bill explodes
Money.com.au’s analysis paints a stark picture of just how much extra you could be paying. Based on median dwelling values and a typical 30-year loan at today’s average variable rate (5.49 per cent p.a.), the numbers are eye-watering.
Homebuyers in Adelaide face the highest overall cost, with rolling stamp duty into a home loan adding a colossal $108,923 once interest is factored in.
Source: Money.com.au
Buyers in Sydney could pay an extra $103,698 if they capitalise stamp duty into their mortgage, while an additional $98,451 awaits Melbourne homebuyers who add stamp duty to their loan.
The cost for Brisbane buyers could hit an extra $74,196, and capitalising stamp duty in Perth could cost an additional $84,262.
Even in regional areas, the figures are substantial, with buyers in regional NSW facing an extra $60,280 and regional Victoria an additional $65,737.
Other capital cities also see significant increases: the ACT could see an extra $55,607, Hobart an additional $55,786, and Darwin an extra $59,322.
Younger generations most vulnerable
The research highlights that younger Australians are most likely to fall into this trap.
Nearly two-thirds of Gen Z homebuyers (64 per cent) borrowed extra to cover upfront costs, followed by 54 per cent of Millennials.
“First homebuyer exemption thresholds haven’t kept pace with rising house prices, which means many younger buyers miss out on stamp duty relief and end up adding stamp duty and other fees into their loan,” Hays notes.
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
Claudia Grentell, a 24-year-old Queensland homebuyer, exemplifies this trend.
She and her partner, using a guarantor, opted to increase their loan to cover remaining solicitor costs and stamp duty, allowing them to keep about $12,000 at settlement for immediate renovations and moving expenses.
She said their broker took the lead in their mortgage journey — the couple paid $830,000 for a freestanding house, while their mortgage was $840,800, which included stamp duty fees.
“I was blissfully aware that I’ll pay interest on the stamp duty component,” Claudia admitted. “But it wasn’t really a topic of discussion with our broker. As first home buyers, this is what we were advised to do if we wanted to buy. It was more like: ‘This is what we’ll do.’ The broker took the lead and we were happy to oblige.”
A strategic play for investors, a costly mistake for homebuyers
While it’s often a costly decision for owner-occupiers, Hays points out that for investors, rolling upfront buying costs into the loan is often viewed differently.
“In most cases, the extra interest on the loan is tax-deductible,” she says.
However, for the average Australian family, this isn’t the case.
46 per cent of homebuyers roll stamp duty and upfront fees into their mortgage.
While financing upfront costs can help buyers enter the market sooner, Hays advises having a plan to reduce the interest, such as using an offset account or redraw facility.
As property values grow, the equity can also put them in a better position to refinance or restructure their loan down the track.
The message is clear: while the convenience of adding stamp duty to your mortgage might seem appealing in the short term, the long-term financial burden is immense.
Understanding this hidden cost is crucial for every Australian looking to buy property, lest they unknowingly sign up for a six-figure mistake.
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