First Home Buyers Tips

Wayne Henry

Wayne Henry

Mortgage Adviser & Founder of Wayne Henry Mortgages.
Buying your first home can be tricky without help. That’s where we come in. Our focus is on making sure the house buying process runs as smooth as possible for you. We’ll help you prepare all the necessary information to get you in the perfect position to secure that dream home. So let’s get started…

Getting your deposit together

Most lenders require a minimum deposit for a home loan of at least 20% of the house price. So if you’re buying a house worth $600,000 you’ll need to save a deposit of at least $120,000. However there can be some exceptions, such as through the Kāinga Ora – First Home Loan Scheme for first home buyers, which would require a deposit of 5%.

Keep in mind that the bigger your deposit, the less you’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.

Kāinga Ora - First Home Loan

Kāinga Ora – First Home Loans are issued by selected banks and other lenders, and underwritten by Kāinga Ora. This allows the lender to provide loans that would otherwise sit outside their lending standards. As well as having a 5% deposit, you need to meet certain criteria including an income cap and regional house price cap. You will also need to meet the specific lending criteria of the participating lender you choose. Find out if you are eligible and how to apply via: First Home Loans.

Kāinga Ora - Home Start Grant

If you’re a first-time home buyer, or a previous home owner and you’ve been making regular KiwiSaver contributions for 3 – 5 years, you may be eligible for a First Home Grant of up to $10,000. Find out more information and apply for the grant via: Home Start Grant.

KiwiSaver - First Home Savings Withdrawal

If you have been a member of KiwiSaver for at least three years, you may be able to withdraw all, or part, of your savings to put towards buying your first home. Eligible members can withdraw their KiwiSaver savings (including tax credits). However at least $1,000 must remain in their KiwiSaver account. Also, you must intend to live in the property and it cannot be used to buy an investment property. Find out more information and apply for the withdrawal via: First Home Savings Withdrawal

Family Bank

The easiest and cheapest way to buy your first home is by using your family or parents to guarantee that part of your 20% deposit that you don’t have.

Their guaranteed portion will be secured over their property or it can be secured over a term deposit, so you’re not asking them to fork out cash, it’s more like putting a ‘hold’ on their existing equity until you’ve paid that portion back.

In the event they use a term deposit as security, the term deposit stays in your parent’s name and they continue to earn interest on it. Guaranteed home loans are treated the same as loans under 80% so you get great interest rates, there are no fees, and you’ll even get a cash contribution from the bank.

What can you afford?

The amount you can afford for a home depends on a couple of things: how much you can afford to repay on your current income, and how much a lender will lend on a property. It’s essential to plan a budget and work out how much you are able to pay back on your loan. Lenders want to be sure that you’ll be able to keep up with your repayments and still have enough money left over to live on. 

Budget planning

To find out what your budget is you’ll need to get a realistic picture of your finances, i.e. your income vs your spending, and weigh this up against the deposit you’ve saved for your first home. For help with your budget, check out our handy online Budget Planner.

Loan repayments

Our easy to use Loan Repayments Calculator lets you see what your repayments could be. Easily change the amount you borrow and the length of time you want to have the loan for. Simply adjust the sliders and find a repayment amount to suit your budget. Try it out now: Loan Repayments Calculator

Securing Pre-approval

Pre-approval is a lender telling you that they’re prepared to loan you money, providing you meet a few conditions – usually around the value of the house you want to purchase. Getting a pre-approval makes it easier to house-hunt as you know just how much money you’ll be able to borrow. That’s where we come in. We can help you get pre-approval for your loan, and going through us means you’ll be more likely to be approved and probably get a better deal. Going through a single lender means they’ll only offer you their solution, whereas we can shop around and make sure you secure the right loan for your needs. The pre-approval process requires that you supply a variety of paperwork and disclose your financials – but don’t worry we’re here to help you gather and prepare all the necessary information.
Contact us to get things started.

How to buy your first home

Once you have pre-approval in place from the lender there are many ways to buy property in New Zealand. Although auctions are still quite common, you may also make your purchase through negotiation, tender or a private sale. When you’re happy with a place and you want to buy, you’ll need to sign a Sale and Purchase Agreement. This is the legal contract between the buyer and seller where you can insert your own purchase conditions such as:

Lawyers & contracts

We strongly recommend that you get your lawyer (or solicitor) involved as early as possible. Your lawyer is responsible for the conveyancing (i.e. the change of ownership paperwork) and can also be a useful advisor. Your lawyer will:

Building inspections and valuations

Once you’ve signed a Sale and Purchase Agreement we recommend you arrange a building inspection and valuation and have these available for you before going unconditional. A valuation can cost between $600 – $1,000 and a building inspection can cost from $250 for a verbal report to $650 for a written report. So if you’ve got a qualified friend/family member you can trust, get them to give you an informal report to save some cash. Note that any plaster homes should have a full report completed and we recommend you don’t rely on a report provided by the vendor. 

What is a LIM report?

A LIM report is prepared by the council and is based on its property records. It will tell you whether or not the property has the right consents and a code of compliance. You’ll have to order a LIM report from your Council, which will cost around $250-$350. It often takes up to 10 days to get it too, so order as soon as you’ve signed the Sale and Purchase Agreement. 

When is the deposit paid?

In a standard property sale, the home deposit has to be paid when you exchange the signed copies of the Sale and Purchase Agreement with the seller (“vendor”), after your offer has been accepted. If you buy at auction, you will sign the contract and pay a deposit (usually 10%) on the spot. 

Frequently asked questions

You’ve probably got a lot of questions. Here are some that we answer most often:

Most likely. Lending criteria is different from bank to bank so we’ll help you shop around for the best deal. If you go directly to your bank you’ll have less chance of securing the
right loan (or any at all) because they can only give you one solution.

This is dependant on a number of things like: How much deposit you have, your income, and your ability to repay your home loan after you’ve paid your outgoings. Check out our Loan Repayments Calculator to see how much you could borrow.

Quite a bit, but we’re here to help and will try to reduce it for you. First you have to fill out a form with all your assets, debts, income and expenses. You’ll need to prove your income, that you have a deposit saved and three months of bank statements. Remember, the bank might also run credit checks. 

Our services are FREE – The lender pays us so you don’t have to.

Great advice and a ton of experience. We’re here to help you through the entire buying process (not just the mortgage). If you like nothing more on a weekend than to pore over interest rate updates, decipher mortgage jargon and scroll through bank T&Cs, then you won’t need a broker. But if you’d rather spend that time with your feet up, we can help. As mortgage advisers we have more options available to us when it comes to finding a mortgage solution. By only talking to one lender you are potentially selling yourself short and getting a poor deal.

It normally takes less than three days to arrange finance but it pays to get organised ahead of time. Every now and then, the banks can be a bit slow, especially if the mortgage is over 80% of the property’s value. So, if you are borrowing over 80%, allow for 5-7 working days to get an approval. Bottom line is, the earlier you talk to us and get things rolling the easier it’ll be for all. 

For more information on how to buy your first home, contact us for an obligation free chat.

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