Adelaide buyers have been hit with Australia’s worst mortgage trap

South Australians are increasingly attacking their lenders to block their stamp duty so they can get into the market – and it means they’re paying more in the long run than anyone else in the country.

New research from money.com.au shows that 46 per cent of all Australian buyers are also borrowing against their stamp duty payment, with 28 per cent increasing their home loan to cover all upfront costs, including stamp duty, conveyancing and settlement costs.

To the detriment of South Aussies, those who want to include their upfront costs in their loans face the highest costs of any consumer in the country.

Based on the median house price of $916,000, Adelaide home buyers face the highest overall costs, with stamp duty coming in at $53,347.

Over the life of the loan, this adds $108,923 to the cost of the home.

Buyers who buy in Regional SA – where the median house price is $495,000 – and buy a $26,059 stamp duty mortgage will pay $53,207 more over its 30 years.

The next closest was Sydney, where stamp duty on a $1.237m property is $50,788, or $103,698 when added to a 30-year mortgage.

Money.com.au’s Mortgage Expert, Debbie Hays, if you’re a first home buyer who doesn’t qualify for exemptions, stamp duty and purchase charges may feel like paying a second deposit. “Many of those young buyers then add those taxes and their mortgages and take on more debt than they originally planned,” he said.

“The worst part is that you will be paying interest on that extra money over a 30-year period, 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 interest, such as using an offset account or refinancing.

He said investors are looking at the increase in upfront costs differently.

“For investors, stamp duty and upfront costs on loans are a strategic game. In most cases, additional interest on loans is tax deductible,” he said.

Ray White’s chief economist Nerida Conisbee

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Ray White Group chief economist Nerida Conisbee said the cost of stamp duty affects the speed of the market.

“Taxes and government policy can go up quickly,” he said.

“Changes to stamp duty, land tax, capital gains tax or investor incentives all change the financial balance for buyers and sellers.

“These shifts can bring transactions forward or cause delays, resulting in short-term sales.”

First-time buyers Claudia Grentell and Tristan Thomson had been looking for more than six months before deciding to combine stamp duty payments into their home loan to jump into the property market.

“As first home buyers, this is what we are advised to do when we want to buy,” she said.

“Because we use a guarantee, our broker explained to us that we can add some of the credit costs if we want to set aside more money,” said Ms. Grentell.

Claudia Grentell and her two children Micah, 5, and Maisie, 2. Claudia and her partner bought their house in November and took out an extra loan to pay stamp duty and other costs for the purchase. Photo: Nigel Hallett

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By being able to shop, Ms. Grentell said, it ended the family weekend rush at open houses.

For Bronte Miller, 28, long-term rent seems to be a reality for her.

But that all changed when she signed a contract for her new home with a HomeStart Loan that covered her upfront expenses.

Although he is exempt from paying stamp duty, the seven-year, no interest loan covers some of the upfront costs, allowing him to get home ownership sooner.

“I was looking for it for about two years before I found it,” he said.

“I always thought I would rent, but I feel very lucky that this time next year I will have my own home.”

Bronte Miller bought through HomeStart, with her loan covering the upfront costs associated with the purchase. Pic RoyVP photo

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“I’m lucky that my expenses are being paid for with a loan, and the stamp duty exemption I qualify for, because without it I don’t think I could have done it – that’s a lot of extra money you need up front.

“I don’t think people think about how much they end up paying when they borrow that extra money to cover those costs, because it can be very confusing.”

HomeStart CEO Andrew Mills said homebuyers were struggling.

HomeStart chief executive Andrew Mills

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“Saving for a house is a challenge, especially when upfront costs are added on top of the deposit,” he said.

“Our $10,000 first loan helps ease that pressure and gives more South Australians the opportunity to buy or build their own home.”

– with Aleisha Dawson