What buying actually costs

Almost everyone starts in the same place: they look at a listing price, divide it by what they've saved, and get a number that either terrifies or encourages them. Both reactions are usually wrong, because the listing price is only part of what you need.

There are three separate pools of money involved in buying a home, and confusing them is the single most common reason people think they're further away than they are — or closer.

1. The deposit

This is the part of the purchase price you pay yourself. It's expressed as a percentage: a 20% deposit on a $600,000 home is $120,000. Twenty percent is the number everyone quotes because it's the point at which lenders stop charging you insurance — but it is not a legal minimum, and most first home buyers in Victoria today are not putting down twenty percent.

2. The costs on top

Stamp duty, conveyancing, building and pest inspections, loan fees, title registration, council rate adjustments, and moving. These are cash costs. They cannot be borrowed as part of the loan, with the occasional exception of mortgage insurance. For a typical Melbourne purchase they add up to somewhere between a few thousand and several tens of thousands, and stamp duty is the swing factor.

3. The buffer

The money you don't spend. Something always comes up in the first six months — a hot water service, a fence, a car repair that now has to compete with a mortgage. Going in with nothing left is how a good purchase turns into a stressful one.

So how much do you actually need?

It depends on the price, whether you qualify for a scheme, and whether you're willing to pay mortgage insurance to get in sooner. The honest answer is that there is no single figure — but there is a figure for you, and you can work it out in about five minutes with the calculators on this site.