6 home buyer questions, answered

From first-home buyers to investors, the prospect of purchasing a property is often filled with excitement as well as apprehension. To alleviate some of the uncertainty, let's address the top six most commonly asked questions from home buyers.

1. How much deposit do I need?

While many say a recommended deposit for home buyers is 20%, every lender is different - some accept as low as a 10% deposit while others (albeit very few) might be happy to accept just a 5% deposit.

If you want to avoid paying lenders mortgage insurance, you’ll need to save at least 20%.

If you’re a first home buyer with a parent who is prepared to act as guarantor on your loan, you might not require a deposit at all.

2. What is lender’s mortgage insurance?

When your deposit is less than 20% of the value of the property you're buying, a lender is going to charge you a hefty lender's mortgage insurance (LMI) premium to reduce its risks.

LMI is one of those extra costs that often catches home buyers by surprise.

It can cost thousands of dollars or even tens of thousands of dollars.

But it's sometimes worth the cost, especially when you have a choice between paying LMI or spending years saving up for a 20% deposit.

3. What is stamp duty and when do I need to pay it?

Stamp duty - also known as transfer duty - is a state-based tax that you’ll sometimes be required to pay on purchasing assets such as property, land, cars, shares, business assets or even contracted services such as loans, gifts, and some insurance policies.

It’s essentially a transfer fee paid by the property buyer to transfer the property title from the seller's name into their name.

The buyer is responsible for paying stamp duty within 30 days of signing the contract or settlement… it cannot be added to the mortgage.

4. What other expenses should I budget for?

Outside of the actual purchase price of the property, you’ll also need to budget for the following expenses:

• Stamp duty costs

• Loan application fees

• Mortgage registration transfer fees

• Legal and conveyancing fees

• Lenders mortgage insurance

• Inspection reports

• Moving costs

5. Do I need a conveyancer or solicitor?

A conveyancer (or solicitor) covers and organises all the legal aspects of a property purchase, including transferring the property out of the vendor's name and into yours, amending or drawing up contracts, obtaining a title search and a lot of other tasks. Unless you have some rock-solid legal credentials, you should hire an expert to do it for you.

6. Is a pre-settlement inspection necessary?

It is strongly recommended that a buyer conducts a pre-settlement inspection within a reasonable time before the settlement date. This way, if anything is amiss, you can negotiate with the vendor for remedial actions to be completed ahead of settlement.