Buying your first home is one of the biggest financial transactions you’ll probably ever make. So you need to make sure you’re aware of the costs involved in purchasing a house, so that you’re prepared and not stung by any unexpected costs along the way – as people often are!
Apart from the obvious expense of the purchase price of the house, there are a few expenses you need to prepare for –
- Professional services during the property purchase phase
- Mortgage repayments
- Ongoing expenses associated with owing a house
Lawyer or Conveyancer
Buying a house is a legal transaction that comes with a lot of paperwork, so engaging with a lawyer or conveyancer is essential when buying a house. They can also provide peace of mind.
We recommend that you find a lawyer or conveyancer before you start looking at houses, as buying can move fast when you find something you like, and you need to ensure you have the support of a good lawyer or conveyancer.
Some examples of how a lawyer or conveyancer can help you when purchasing a house:
- Providing advice on every part of the house purchase to ensure you know what you’re getting into.
- Reviewing the Sale & Purchase Agreement for the house you wish to purchase to ensure that the deal is documented correctly.
- Assisting with due diligence on the property.
- Reviewing the LIM report on the house you want to purchase.
- Searching and checking the property’s title to check and share any information that may affect you.
- Initiating your KiwiSaver withdrawal.
- Handling documents and arranging signing of key documents, including your loan documents for the bank.
- Liasing with other parties related to the property transaction to negotiate & make changes to the Sale & Purchase Agreement or resolve conflict.
- Managing the settlement process.
- Providing advice on Relationship Property matters if one party has more deposit than the other and drafting a Relationship Property Agreement if required.
All up, the standard legal fees for a house purchase can range anywhere from $1,500 to $3,000 depending on the type of property you’re purchasing, and the amount of work involved on the lawyers end (this can be more complex if you’re purchasing a house under a Trust).
Qualified Building Inspector
If you’ve found a property that you like, it’s worth hiring a qualified building inspector to check it out so that they can identify any hidden defects, provide a comprehensive assessment of the property’s condition, and help you make an informed decision about potential repairs or issues that could lead to significant costs down the line. They will also look for any signs that the property is a leaky building.
Some Real Estate agents will offer you a pre-prepared building report, but we always recommend getting your own independent report done.
If you’re looking to buy it’s a good idea to get in touch with a local building inspector as soon as you start your property search. Ask friends and family for their recommendations and request a sample report from any inspector you contact to get an idea of the kind of information they provide.
We recommend you choose a building inspector who has professional indemnity insurance and carries out their work in accordance with the New Zealand Property Inspection Standards.
A good building inspector is not cheap, but generally, you can expect to pay anywhere from around $300 to $1,000 for a building report – however, the price of NOT getting one now could result in expensive problems later on.
Land Information Memorandum (LIM Report)
As part of the pre-purchase phase, you’ll need to get in touch with the local council for the property’s Land Information Memorandum, or what is more commonly known as a LIM Report.
The LIM Report will include a summary of current property information held by the council, including the rates, consent for work done on the property and if there are any known land issues, such as subsidence or flooding. Information can be added to a LIM over time — so if you’re offered one by a seller or real estate agent, make sure it’s up to date.
Generally, this report should be somewhere in the $300 – $400 range. However, if you need it urgently, within 48 hours or so, you’ll have to pay a bit more.
Registered Valuation
If you’re looking to purchase a house, there may be some situations where the bank will request for you to pay for a registered valuation as part of their condition for finance.
A registered valuation is a professional assessment of the market value of a property carried out by a qualified and licensed valuer. A registered valuation provides an independent and unbiased assessment of the property’s value.
At a simple level, a registered valuation involves the qualified valuer completing an in-person inspection of the property, conducting a thorough market analysis and using their expertise to assess the value of the property at that particular point in time.
Some examples of when the bank may request for a registered valuation:
- When you have less than 20% as a deposit – this is to make sure that what you’re paying for the property is what it is worth and to ensure that the bank is not lending more money that the property is worth, thus protecting themselves from potential losses if the property value drops in the future.
- When you’re buying as a private sale – the reason for wanting a registered valuation is to confirm the value of the property so that everyone is getting a fair deal.
- When you’re building a new home – the bank wants to confirm that what you’re building is worth the amount you’re paying for it. They also want to make sure that the specificiations are correct (quality of the build), the land is worth what you’ve paid for it, and once the build is completed, it will be worth what you’re paying for it.
- When the bank feels that there are anomalies with the property.
Banks will need the valuation to be completed by an independent and approved valuer, rather than the buyer choosing their own valuer. The team at Wayne Henry Mortgages will be able to arrange for your valuation on your behalf as part of the process for satisying your conditions with the bank.
Generally, a valuation can be anywhere from $900 to $1,500. The price will depend on the property, the valuation company and the complexity of the valuation. If you need a valuation completed urgently, then expect to pay an additional $200 fee.
Mortgage Repayments
Once you’ve settled on your new house, you’ll be expected to start making mortgage repayments within the first 4 weeks to start repaying your mortgage. Depending which bank you go with, you can opt to have either weekly, fortnightly or monthly mortgage repayments.
We recommend that you have a look online to see what interest rates banks are offering and to use our Loan Repayments Calculator to estimate how much your mortgage repayments will be BEFORE you start looking at houses so that you know what you’re in for.
At the time for applying for finance, the banks will test your ability to repay a mortgage using a much higher figure than current interest rates, to make sure you can still manage even if interest rates do go up.
We recommend that you use a Mortgage Adviser from the Wayne Henry Mortgages Team, to help you shop around to find the most suitable bank for your situation.
Ongoing costs associated with owing a house
Once you’ve been successful in making it into your own home, you should prepare yourself for a number of ongoing costs that will start the minute you move in!
- Council Rates – this will probably be your biggest ongoing expense and it will go towards maintaining public infrastructure, services and facilities in your area. This cost will vary depending on where you live and which council you fall under. We recommend that you familarise yourself with what this cost will be by visiting your council website, as they provided details of what you annual council rates will be. You can either pay this annually or quarterly, or you can opt into more regular direct debit payments to make it more manageable and affordable.
- Body Corporate Fees – if you buy an apartment, townhouse or unit, you may need to pay for annual Body Corporate Fees. These fees are to help cover things like the upkeep of the building and its facilities and property insurance. We recommend you do your due diligence beforehand to understand what these fees are and how the property is run. We also recommend you read the latest body corporate minutes, as these may highlight any ongoing maintenance & repair issues associated with the property.
- Insurances (property and contents) – as part of the banks conditions for finance, they’ll require you to take out full property insurance on the property. This insurance is to ensure you are protected from any worst-case scenarios. You’ll also need to ensure that the property insurance has no exclusions or special terms that will have an impact when making a claim.
- Maintenance – even if you’re purchasing a brand new house, you’ll need to factor in ongoing maintenance costs that will need to be done as the years go on (ie. exterior paint, plumbing issues, etc). We recommed that start putting funds aside on a regular basis so that you’re covered whenever you need to complete any maintenance work on your house.
Want to find out more?
If you’re considering purchasing your first home, we recommend you seek expert help from one of our experienced Mortgage Advisers.
