Your offer has been accepted, but the money decisions are not over. If you are asking, “what costs do home buyers pay?”, the short answer is more than just the deposit. Planning for the costs around a property purchase can stop a happy milestone becoming a stressful scramble before settlement.
The exact amount depends on the home, lender, council area and the conditions in your agreement. But knowing the likely costs upfront gives you a far clearer picture of what you can comfortably afford – not simply what you may be approved to borrow.
What costs do home buyers pay before settlement?
Your deposit
The deposit is usually the biggest amount you need to have available. In New Zealand, many buyers aim for at least 20 per cent of the purchase price, although some lenders may consider a smaller deposit. A lower deposit can make buying sooner possible, but it may also mean a higher interest rate, a low-equity margin, or fewer lender choices.
It helps to separate two meanings of “deposit”. The deposit paid after signing a sale and purchase agreement is commonly 10 per cent of the purchase price, though this is negotiable. Your total contribution towards the purchase may be larger, especially if your lender requires a 20 per cent deposit.
A deposit is not an added fee in the same way legal costs are. It becomes part of the money used to buy the home. Still, it needs to be available at the right time, and you should not use every dollar you have saved just to reach it.
If you are eligible to use a KiwiSaver first-home withdrawal, it may form part of your deposit. There are rules around eligibility, timing and the minimum balance you must leave behind, so factor this into your planning early rather than assuming the funds will arrive instantly.
Solicitor or conveyancing fees
You will need a property lawyer or conveyancer to handle the legal side of the purchase. They review the sale and purchase agreement, check the title, explain any conditions, liaise with the lender, arrange settlement and transfer the property into your name.
Legal fees vary with the complexity of the purchase. A straightforward owner-occupied home may cost less than a purchase involving a trust, a new build, a cross-lease title, a Kāinga Ora first-home loan, or a property with unusual conditions. Ask for an estimate that includes disbursements, not just the lawyer’s base fee. Disbursements can include title searches, electronic settlement charges and registration costs.
Good legal advice is one cost worth treating carefully. A cheap quote is not always the best value if you cannot get clear answers before you commit to a contract.
Property checks and reports
A home can look tidy at an open home and still have expensive issues hidden behind the walls, under the floor or in the paperwork. Most buyers should allow for due diligence, particularly when buying an older property or a home with additions, decks or alterations.
The common checks include a building inspection, a Land Information Memorandum (LIM), title review and, where needed, a registered valuation. You might also need specialist reports for drainage, methamphetamine contamination, asbestos, roofing, electrical work or retaining walls.
A building report commonly costs several hundred dollars, and more for a large or complex home. It can feel frustrating to spend money on a property you do not end up buying. Yet uncovering a major defect before you go unconditional can save tens of thousands of dollars, or give you grounds to renegotiate the price.
A LIM is ordered from the local council and can flag matters such as consent history, flooding information, drainage, rates and known hazards. In Wellington and the Kāpiti Coast, where weather exposure, slopes and older housing can all affect a property, taking the time to understand these records is particularly worthwhile.
Valuation and lender fees
Some lenders require a registered valuation, especially where your deposit is below 20 per cent, the property is unusual, or the purchase price needs support. This is different from a real estate appraisal. A registered valuer provides a formal report that a lender can rely on.
Depending on the lender and loan structure, you may also face an application fee, valuation administration fee, low-equity margin or a fee for arranging a particular loan package. Not every lender charges the same way, which is why comparing the headline interest rate alone can be misleading.
Your adviser can help you look at the full lending picture: interest rate, fees, cash contribution terms, repayment flexibility and how the loan fits your household budget. The best option is not always the loan with the lowest advertised rate.
Costs to allow for at settlement
Insurance
Lenders generally require house insurance to be in place from settlement day. You will need to arrange cover before the property becomes yours and provide evidence of it to your lender. The first premium may be paid annually or by instalment, depending on the insurer and your preference.
Insurance costs can vary significantly based on the property’s location, rebuild cost, construction materials, claims history and natural-hazard exposure. Check that the sum insured is realistic and understand the excess. Choosing cover based only on the lowest premium can leave you underinsured when you need it most.
Rates and other adjustments
At settlement, your lawyer calculates adjustments between you and the seller. Council rates are the most common example. If the seller has paid rates beyond settlement, you reimburse them for your share. If rates are due, the amount may be adjusted in your favour.
There can also be adjustments for body corporate levies on an apartment or unit, as well as other prepaid outgoings. These are normal settlement calculations, but they can add to the cash you need on the day. Your lawyer should give you a settlement statement ahead of time so there are no surprises.
The gap between loan approval and cash needed
It is easy to assume that if the bank approves a certain loan amount, every purchase cost will be covered. In reality, a lender may fund the property purchase but not your legal bill, inspection, LIM, moving costs or emergency savings.
Before making an offer, work backwards from your available savings. Set aside enough for the deposit, due diligence, legal work, insurance and settlement adjustments. Then keep a buffer. Owning a home almost always produces a few early expenses, even if the building inspection is reassuring.
Costs after you get the keys
Settlement is the start of home ownership, not the finish line. Your regular budget needs room for mortgage repayments, rates, insurance, utilities and maintenance. If you are buying a unit, townhouse or apartment, body corporate fees may be a substantial ongoing cost as well.
Moving day also adds up. You may need removalists, storage, cleaning, new locks, curtains, appliances, a lawn mower or basic repairs. None of these should decide whether you buy a suitable home, but they should be included in your first-year budget.
A practical rule is to keep an emergency fund separate from your deposit where possible. A broken hot-water cylinder or unexpected car repair is much harder to manage when every available dollar has gone into settlement.
How to budget with fewer surprises
Start by asking your lender or mortgage adviser what contribution is required and whether any lender fees apply. Then ask your lawyer for an all-inclusive estimate, including likely disbursements. Obtain quotes for a building inspection, LIM and insurance before you go unconditional, rather than relying on rough guesses.
It is also wise to distinguish between essential costs and optional improvements. A building report and insurance are sensible essentials. Repainting the lounge before you move in may be desirable, but it can wait if your cash buffer is tight.
Buying a home should feel exciting, not like a race to cover last-minute invoices. Getting clear on the costs before you make an offer gives you more confidence to negotiate, choose the right loan structure and move into your new place with breathing room.
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