Buying Your First Home
tips for first home buyers
Getting into a first home takes careful planning and, for most of us, serious budgeting! These tips for first home buyers will help with planning for the total cost of buying a home, including the mortgage, insurance, legal fees and other costs. Some more help for first home buyers may be available from the government and KiwiSaver, too.
Saving for a deposit on a first home
The first step in saving for a house deposit is to set a savings goal. Most lenders will require a minimum deposit for a home loan of at least 20% of the amount we are borrowing. So if buying a house worth $600,000 we’ll need to save a deposit of at least $120,000. There may be some exceptions, however, such as through the Welcome Home Loan Scheme for first home buyers, which would require a deposit of 10%.
Keep in mind that the bigger our deposit, the less we’ll pay in interest over the long term. Loans that are for more than 80% of a property’s value tend to have higher charges – as there is more risk for the lender. These charges can vary a lot. Some banks charge for lenders mortgage insurance while others increase the interest rate to cover the risk.
Once we’ve worked out how much to save for a house, use this budget planner to work out a budget. It might mean cutting down on non-essentials for a while but the satisfaction of moving into our first home will be worth it!
Not sure how to calculate mortgage repayments? Use our mortgage tool to see what repayments with different loan settings will be like
If there’s a difference between what mortgage repayments would be and what we’re currently paying in rent, it’s a good idea to start putting that amount into regular savings. It will give us (and our lender) an idea of how well our household budget will be able to cope. Use this savings calculator to see how quickly those savings can add up!
With a 10% deposit, we may be able to borrow enough to buy a first home under the government’s Welcome Home Loan Scheme.
If we’re in KiwiSaver and have been contributing to a scheme for at least three years, we may be eligible for a KiwiSaver HomeStart grant. This means that the government could give us up to $5,000 towards an older, existing home, or up to $10,000 towards a newly built home or land to build a new home on. If borrowing with someone else, we can combine those first home buyer grants, which means up to $20,000 if both of us have been contributing to KiwiSaver for five years. There are other eligibility criteria to meet, as well as regional house price caps.
We may also be able to withdraw almost all of the money in our KiwiSaver account to help buy a first home. This is called a KiwiSaver savings withdrawal.
Find out more about the KiwiSaver deposit subsidy and the KiwiSaver savings withdrawal on the Housing New Zealand website.
Choosing what and where to buy
Our first home may not be our dream home. But it could be an affordable first step on the property ladder.
There’s no point owning our own home if we can’t keep up with the mortgage repayments. Sometimes ‘the worst house in the best street’ is the way to go – particularly if we’re any good at DIY!
Real estate websites are a good place to find out how much properties are worth in different areas.
Want to buy an apartment or townhouse? Check to what degree the bank will lend on these types of properties.
If buying a property as an investment, as well as a place to live, it’s important to think about resale or rental potential. Rental property is considered a higher risk by the banks and they may not lend as much as they would for a property we are going to live in.
Consider things like:
- Is the house close to public transport routes?
- Are there shops and schools within walking distance?
- Does the suburb have a strong rental market?
Getting a mortgage on a first home
Our first mortgage, or home loan, will probably be the biggest financial commitment we’ll ever make.
Most of us look at dozens of places before finding the right home to buy. It’s a good idea to be just as careful when choosing a mortgage. Over time, repayments could add up to a lot more than the cost of the home.
There are many types of mortgages, each with its own interest rate, fees and degree of flexibility. All these things affect how much the loan costs and when it will be paid off.
We can shop around for a mortgage ourselves, or use the services of a qualified mortgage broker at Cartwrights to get your invaluable advice.
Before signing any sale agreement or mortgage paperwork we’ll need to get it looked over by a lawyer. They also handle the ‘conveyancing’ or transfer to us once we buy a house. Fees vary, so shop around.
Find a lawyer and information about the legal issues involved in buying a home on the Property Law website.
Builders' reports and LIMs
A builder’s report can identify any possible problems with the house we’re looking at buying. An experienced builder will find things that the untrained eye will miss and may save us thousands.
A Land Information Memorandum (LIM) identifies any issues with the land the house is built on. It will identify issues like drainage and landslip risks. Order a LIM through the local council, or our lawyer can do it for us.
The deposit is just one of the costs we’ll face when we buy our first home.
We’ll need to set money aside for things like:
- Moving services or truck hire
- Connection fees for phone, power and Internet
- Any renovations or decorating we need to do straight away
- Advertising for flatmates or tenants
- Legal expenses and builder’s reports
Mortgage repayments aren’t the only thing we’ll need to budget for in our new life as a homeowner. Make sure to include insurance, rates and other ongoing costs in the calculations.
House, contents and mortgage insurance
Our home will be our biggest commitment when we have a mortgage and our biggest asset once it is paid off, so we’ll need to protect it from the unexpected.
As well as house and contents insurance, we may need to look at life insurance and mortgage repayment insurance. Remember that Lenders Mortgage Insurance does not cover us, it covers the bank in the event we default on the loan.
Find out more about different types of insurance to consider for a new home. Take a look around the Cartwrights website to understand what you might need.
When we buy our first home we become a ratepayer.
Rates are charges set by local councils to cover the cost of things like roads, water supply, sewerage and parks. They can be up to thousands of dollars a year.
Ask the real estate agent what a property’s rates are before making an offer – so we know if we can afford them. We may also be able to search for a property’s rates on the local council website.
Body corporate fees
If buying an apartment or townhouse that’s part of an accommodation complex and has ‘unit title’, we’ll probably need to pay ‘body corporate’ fees. These cover things like insurance and maintenance of shared areas.
Get a lawyer to go over these details carefully. Is there a fund for major maintenance work in place?
Where to go for help
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