The true cost of buying a home in Melbourne is typically double the sticker price. Picture: Jason Edwards.
The true cost of buying a typical family home in Melbourne is double the sticker price buyers think they’re paying, with an array of hidden costs behind every purchase.
For the city’s $855,000 median house price the total cost of paying off a 30-year home loan with a 20 per cent deposit, as well as stamp duty costs, works out to almost $1.65m.
New Finder stats show owning a home outright costs more than $2m in 238 suburbs across the city, for those who borrow to make it happen.
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And unless you are a first-home buyer who doesn’t have to pay stamp duty for a purchase under $600,000, the only suburb where you can get a home for under $1m all up is Melton where the $501,000 typical home will cost you almost $937,000 once you’ve paid off a $400,800 loan and the $22,030 in stamp duty costs.
And that doesn’t include council rates, insurance, administrative fees for the purchase such as conveyancing or home maintenance.
Secondary analysis also revealed a six-figure stealth hit that could be awaiting first-home buyers who use the federal government’s recently expanded First Home Guarantee to purchase a property with a 5 per cent deposit, instead of the 20 per cent standard.
Hadfield is home to Melbourne’s $855,000 median house price, which translates to an almost $1.65m spend after a 30-year loan. 60 Sutherland St is for sale at $800,000-$880,000.
Hawthorn East’s $2.5m median house price could be $4.8m once you’ve factored in hidden costs. 34 Station St is for sale at $2.5m-$2.65m.
Buying a home at Melbourne’s $855,000 median house price, they would wind up paying $140,000 more over the life of a 30-year loan than those who save a 20 per cent deposit.
Even market entrants paying the city’s more affordable $600,000 median unit price will pay an extra $97,000.
Finder home loans expert Richard Whitten said most buyers underestimated the “astronomical” long-term cost of owning a home, and those who had a better understanding of the figures might opt to purchase a more affordable residence so they could have a smaller loan.
However, with most of the extra hidden cost of buying a home going to your lender, Mr Whitten said there were ways to beat the bank.
“Even making small, regular extra super contributions has a very big impact on your wealth at retirement,” he said.
He added that while the First Home Guarantee could help young buyers get a home sooner, it did come with risks due to the larger loan size and owning a smaller portion of your home, meaning you not only paid more but could struggle to sell or refinance if you encountered problems.
Melton is the only suburb in Melbourne where the median price is low enough that you won’t wind up paying $1m by the time you finish the mortgage. 89 Barries Rd has a $595,000 asking price.
The $1.23m-$1.29m price tag for 27 Kalbar Rd, Eltham, could turn into a figure north of $2.4m if you don’t take steps to beat the bank.
Mortgage Choice broker David Thurmond said long-term cost was “the last thing” homebuyers were thinking about, but noted very few people would go on to pay their mortgage over 30 years.
Most would instead pay it off earlier, or leverage equity to invest, and effectively change their loan situation a few years after taking it out.
Mr Thurmond noted that even an extra $50 a week would put you $13,000 ahead of your loan in five years — which could save you thousands over a loan’s length.
The broker said owners could also knock about five years off of their mortgage by swapping to fortnightly repayments from monthly, due to the way banks calculate interest.
Paying weekly could reduce a 30 year loan to 24 years.
Money Cat Finance chief executive Evan Davis said the increased cost of living in recent years had made it harder for families to get ahead.
33 Thorburn St, Hampton, is listed for sale at $2.1m-$2.3m — either side of the suburb’s $2.26m median price that can wind up at $4.3m+ once you pay your loan.
Even in affordable areas like Wyndham Vale, a home like 19 Farmington Rd with a $590,000-$630,000 asking price will cost you close to twice that once you pay the loan.
“So this generation of homebuyers might wind up having that same loan for a longer period of time than normal,” Mr Davis said.
He added that anyone who hadn’t had their home loan reviewed in three years was “overdue”, those who got theirs looked at every 18 months to two years were in the sweet spot, and anyone doing so annually “needs a better social life”.
What you really pay for a house in Melbourne: from $500,000 to $2.5m:
Thirty year cost includes a 20 per cent deposit, 30 year mortgage repayments and stamp duty.
Source: Finder.
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