Home buyers add $100,000 to mortgage with ‘unknowingly happy’ stamp duty

Imagine adding an extra $100,000 to your mortgage without even realizing it.

For millions of Australians, this is not an imaginary mistake; it is an amazing fact.

New research from Money.com.au reveals half of Australian home buyers are increasing their home loan to cover government costs such as stamp duty and other purchase fees as a shortcut to getting into the housing market.

Of this group, 28 per cent took out a home loan to cover all upfront costs, including stamp duty, conveyancing and settlement fees, while 18 per cent took out a mortgage to cover stamp duty alone, which is often a figure of five.

The remaining 54 per cent of Aussie home buyers paid all government fees and purchase costs separately.

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Money.com.au’s financial expert, Debbie Hays, doesn’t hold back.

“If you’re a first-time buyer who doesn’t qualify for the exemption, stamp duty and purchase fees may be as if you’re paying a second deposit,” he explains.

“Many of those young buyers then add those taxes and their mortgages and take on more debt than they originally planned for.

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

Shocking statistics: Where your stamp duty bill explodes

Money.com.au’s analysis paints a clear picture of how much extra you could be paying. Based on average home prices and a typical 30-year mortgage at today’s variable rate (5.49 percent pa), the numbers are pretty impressive.

Home buyers in Adelaide face the highest overall costs, with stamp duty added to the mortgage adding up to $108,923 in interest once interest is calculated.

Buyers in Sydney could pay an extra $103,698 if they factor in stamp duty on their mortgage, while another $98,451 awaits Melbourne home buyers who add stamp duty to their mortgage.

Costs for Brisbane buyers could reach an extra $74,196, and stamp duty in Perth cost an extra $84,262.

Even in regional areas, the figures are huge, with consumers in regional NSW facing an extra $60,280 and regional Victoria an extra $65,737.

Other major cities also saw significant increases: the ACT could see an extra $55,607, Hobart an extra $55,786, and Darwin an extra $59,322.

Younger generations are more vulnerable

Research highlights that young Australians are likely to fall into this trap.

Nearly two-thirds of Gen Z homebuyers (64 percent) are borrowing more to cover upfront costs, followed by 54 percent of Millennials.

“The restrictions on first home buyer relief are not keeping pace with rising house prices, meaning many young buyers are missing out on stamp duty and ending up adding stamp duty and other fees to their mortgages,” Hays said.

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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Claudia Grentell, a 24-year-old home buyer from Queensland, exemplifies this trend.

He and his partner, using a guarantor, chose to increase their loan to cover the remaining attorney fees and stamp duty, allowing them to save about $12,000 to pay for immediate repairs and moving costs.

He said their realtor led them on their mortgage journey – the couple paid $830,000 for the free home, and their mortgage is $840,800, including stamp duty.

“I happily knew I would pay interest on half of the stamp duty,” Claudia admitted. “But it wasn’t about negotiating with our seller. As first-time buyers, this is what we were advised to do when we wanted to buy. It was like: ‘This is what we’re going to do.’ The salesman took the lead and we were happy to accept. “

A strategic game for investors, a costly mistake for home buyers

While it’s often an expensive decision for owner-occupiers, Hays points out that for investors, removing the upfront cost of a loan is often viewed differently.

“In most cases, the additional interest on the loan is tax deductible,” he said.

However, for the average Australian family, this is not the case.

46 per cent of buyers pay stamp duty and upfront fees on their loans.

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While financing upfront costs can help buyers get into the market sooner, Hays advises having a plan in place to reduce interest, such as using an offset account or refinancing facility.

As property values ​​increase, equity can put them in a better position to refinance or refinance the loan down the track.

The message is clear: while the convenience of adding stamp duty to your bond may seem attractive in the short term, the long-term financial burden is too great.

Understanding these hidden costs is important for every Australian looking to buy a property, lest they unknowingly sign up for a six figure mistake.