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 - Home Start Grant
KiwiSaver - 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
Securing Pre-approval
Contact us to get things started.
How to buy your first home
- Subject to finance – generally 5 to 10 working days
- Subject to building inspection
- Subject to LIM report
- Subject to solicitors approval – 3 working days (insert this if you are not confident about what you are signing)
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:
- Deal with the Sale and Purchase Agreement
- Deal with the seller's lawyer to ensure all of the conditions relating to the sale have been met
- Advise you on any legal issues
- Manage the possession, settlement process and manage the exchange of money and keys, as agreed between you and the seller
- Advise your council of the change of ownership and arrange for the apportionment of local rates charges between the buyer and seller
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:
Will I be able to get a loan?
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.
How much can I borrow?
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.
What paperwork is required?
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.
How much does it cost to use mortgage adviser?
Our services are FREE – The lender pays us so you don’t have to.
Why use a mortgage broker at all? Why not just go straight to the bank?
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.
How fast is it to get finance?
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.
