The home at 36 Orchard Rd, Coconut Grove, is for sale via offer. Picture: realestate.com.au
Almost half of Australian homebuyers are rolling stamp duty and upfront fees into their mortgages, with the practice costing Darwin homebuyers $30,000 extra across the life of a standard loan.
New research from Money.com.au revealed 46 per cent of Australians homebuyers increased their mortgage so help fund government charges, including stamp duty, when purchasing a home.
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.
In Darwin, stamp duty, inclusive of government fees, is $29,054 for a median-priced home of $580,000.
This cost balloons to $59,322 when rolled into a 30-year home loan.
That’s an extra $30,268 over the life of the loan.
Across the rest of the NT, homebuyers pay $13,160 in stamp duty and fees for a median-priced home of $342,000.
If added to a home loan, that cost would increase to $26,869 across 30 years.
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Money.com.au mortgage expert, Debbie Hays. Picture: Supplied
Money.com.au’s mortgage expert, Debbie Hays, said bundling stamp duty and fees into a home loan could help buyers get into the market sooner, but it came with a long-term trade-off.
“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 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.
“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.”
Real Estate Institute of Australia president, Jacob Caine said buyers needing to add stamp duty to their mortgages was a symptom of a housing system in chaos.
“At its most basic level, stamp duty is a tax for pressing a button,” he said.
“It’s a fee to transfer ownership from one person to another.
“When that cost is so high that ordinary households have to finance it over decades, it has very clearly shifted from a tax on the wealthy to a mainstream cost borne by everyday Australians.”
150 Beard Rd, Humpty Doo, is for sale with a price guide of $1.32m. Picture: realestate.com.au
Mr Caine said the entire economy suffered as a result.
“We end up underusing the homes we already have – downsizers do not downsize, upsizers cannot upsize,” he said.
“People stay put, not because it suits their lives, but because the cost of moving is simply too prohibitive.
“ABS data suggests there are between 11 and 13 million underused bedrooms across Australia.
“A significant portion of that is driven by people being unwilling or unable to move because of stamp duty.”
Mr Caine said the biggest risk of rolling stamp duty into a mortgage was the impact it had on household buffers.
“If someone is forced to finance stamp duty, it tells you they have very little financial margin,” he said.
“That’s not a criticism, people are doing whatever they can to get into the housing market, but it leaves them extremely vulnerable.
“When you’re that close to the line, even small changes become dangerous.
“Interest rate increases, rising living costs or unexpected expenses can push households into real stress very quickly.”
Real Estate Institute of Australia president, Jacob Caine. Picture: Supplied
Ms Hays said first homebuyer exemption thresholds hadn’t kept pace with rising house prices, which meant many younger buyers missed out on stamp duty relief and were forced to add stamp duty and other fees into their loan.
The Money.com.au research found rolling upfront buying costs into a mortgage was most common among younger Australians.
Almost two-thirds of Gen Z homebuyers (64%) borrowed extra to cover costs including stamp duty and other purchasing fees, followed by 54 per cent of Millennials.
The share was much lower among older homebuyers, with 39 per cent of Gen X and 27 per cent of Baby Boomers saying they did the same.
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Ms Hays said sometimes financing those upfront costs was the only way people could buy a home, but buyers should have a plan to reduce the interest, like using an offset account or redraw.
“When the property grows in value, the equity can put them in a better position to refinance or restructure their loan down the track to pay less interest,” she said.
Ms Hays said for investors, the financing stamp duty was often viewed differently.
“For investors, rolling stamp duty and upfront costs into the loan is a strategic play,” she said.
“In most cases, the extra interest on the loan is tax-deductible.”
The Money.com.au research found Adelaide homebuyers were stung the most for adding buying costs into their loan, with $53,347 in stamp duty becoming $108,923 across a 30-year home loan.
In Sydney, $50,788 in stamp duty became $103,698, while in Melbourne $48,218 became $98,451.
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